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Federal Reserve Bank of St. Louis
VOLUME 2
PROCEEDINGS
CONFERENCE
O F GOVERNORS
OF T H E F E D E R A L R E S E R V E B A N K S
TREASURY BUILDING
W A S H I N G T O N , D.C,
N O V E M B E R 1 0 , 11, 12,13, 14, 1924
W A L T E R SS. C O X
SHORTHAND
REPORTER
COLUMBIAN BUILDING
WASHINGTON,
D. Cc.
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Federal Reserve Bank of St. Louis
wednesday, N o v e m b e r
mi
The C o n f e r e n c e
o f Governors
reconvened, p u r s u a n t
o f Fed ral Reserve Banks
t o adjournment
o f yesterday,
a t 9:30
Ofelock-a. mm,
Present,
a s indicated i n prelous record.
ir, Strater, F e d e r a l R e s e r v e B a n k o f
Cleveland, C h a i r m a n o f t h e S t a n d i n g C o m m i t tee o n Collections.
Report
o r Standing Committee
on Collections,
The Chairman:
M r . Strater,
t h e Conference h a s refer-
red some things t o your committee i n the past,
A r e you
ready t o report?
Strater:
Chairman:
Y e s ,
w r . Chairman,
T h e conference w i l l b e glad t o
FEpOrt.
ip. Strater:
T h e r e p o r t i s a s follows:
"Po the Conference o f Governors:
Under date o f July 10, 1924, t h e Standing Committee
on Collections s u b m i t t e d
t o e a c h o f t h e t w e l v e Governors,
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Federal Reserve Bank of St. Louis
265
a report
i n which a
short, u n i f o r m p a r a g r a p h d e f i n i n g
general conditions under which Federal reserve banks will
accept c h e c k s
recommended
culars
o r other c a s h items f o r collection w a s
t o b e includéd
i m the check colleétion
cir
o f t h e Federal reserve banks,
A majority o f t h e G o v e r n o r s h a v e e x p r e s s e d t h e i r w i l l -
ingness
t o incorporate t h e s u g e s t e d p a r
check c o l l e c t i o n circular, a l t h o u g h a
number o f t h e m h a v e
expressed t h e o p i n i o n t h a t t h e r e s h o u l d a l s o t
to t h e c h e c k c o l l e c t i o n c i r c u l a r 2
Section 5
or Regulation J
added
o f the provisions
of
of the Federal Reserve 30ard,
in
order t h a t t h e t e r m s o f c o l l e c t i o n m a y apynear i n o n e c i r -
cular letter a n d t o avoid t h e necessity ' for member banks
referring t o t h e c i r c u l a > L e t t e r a n d t h e r e g u l a t i o n s
the Board,
i n order t o k n o w these terms.
of
T h e Committee
suggests the following combination o f the short form o f
uniform liability paragraph with Secti 5
a
of Kegulation J
of t h e P e d e r a l H e s e r v e Board:
‘Svery bank sending c h e
o
r other cash items 0
tne P e c e r a s H e s e r v e P a r t Ol: < s d e k a c x d
c
g
e e
Federal r e s e r v e b a n k d i r e c t f o r o u r account,
act w i l l b e u n d e r s t o o d
t o have a g r e e d t o
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Federal Reserve Bank of St. Louis
264
Che Gertiga-and conditblons
O f t h i e - c i v r e u lra a n d o f
Regulation J of the federal Reserve Board."
‘NR4S O F COLLECTION"
"Regulation J of the Federal Reserve Board prescribes
the f ollowing terms a n d conditions under which all Federal
reserve b a n i s w i l l h a n d l e c h e c k s
f o r member
member c l e a r i n g i t a n k s w h e n r e c e i v e d
a n d non-
f o r deposit
o r collec-
tions
“The e
R
e >
Federal r e s e r v e b a n k s
Board hereby authorizes t h e
t o handle s u c h checks subject
to the following terms a n d conditions; a n d each member a n d non-member clearing b a n k which sends checks
to a n y F e d e r a l r e s e r v e b a n k f o r d e p o s i t
shall b y such actidén b e deemed: (a)
o r collection
t o authorize t h e
Federal r e s e r v e b a n k s t o h a n d l e s u c h c h e c k s s u b j e c t
to the following temas a n d conditions, ( b ) t o warrant
its o w n a u t h o r i t y t o g i v e t h e F e d e r a l r e s e r v e b a n k s
such authority, a n d (c) t o agree t o indemnify a n y
Federal reserve b a n k for a n y loss resulting f r o m the
'
failure o f such sending bank t o have s u c h authority.
(1) A
Federal reserve b a n k will a c t only a s
agent o f the bank from which i t receives s u c h checks
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Federal Reserve Bank of St. Louis
26D
Sand will a s s u m e m o Iiabllisy: e x c e p t r o r i t s o w n nesiiPence a n d i t s p u a r a n t y o f p r i o r e n d o r e c n e n t s ,
(2) A
tor p a y m e n t
Federal r e s e r v e b a n k m a n p r e s e n t s u c h c h
or
i
n
s -LOP 2 COLLEGOLOn C A P e e t a o
the b a n k o n w h i c h t h e y a r e d r a w n o r a t w h i c h t h e y a r e p a y able,
o r i n its discretion m a y forward t h e m t o anothe
agent v i t h a u t h o r i t y t o p r e s e n t t h e m f o r p a y m e n t o r s e n d
them f o r C O l Le6Chien= diz rect
t o t h e b a n k o n which t h e y a r e
drawn o r a t which they a r e payable.
(3) A
Federal reserve b a n k m a y i n its Giseretion a n d
at. i t s option, e i t h e r d i r e c t l y o r t h r o u g h a n agent, a c c e p t
either c a s h o r b a n k d r a r t s
i n payment.
o f o r i n remittance
for s u c h c h e c k s a n d s h a l l n o t b e h e l d l i a b l e f o r a n y l o s s
resulting f r o m the acceptance o f bank drafts i n lieu o f cash,
nor f o r t h e failure o f the drawee b a n k o r a n y agent t o
remit F o r s u c h checks,
draft a c c e p t e d
irawee
bank
(4)
n o r f o r t h e n o n - p a y m e n t fo a n y b a n k
i n payment,
o r as a
remittance f r o m t h e
o r a n y agent.
Checks r e c e i v e d
b y a Federal r e s e r v e b a n k e n i t s
member o r non-"iember clearing banits will ordinarily b e forwarded o r presented “irect t o such banks, a n d such banks
will b e r e q u i r e d t o r e m i t o r p a y t h e r e f o r
a t par i n cash o r
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Federal Reserve Bank of St. Louis
Sls
bank d r a f t a c c e p t a b l o
bank,
t o t h e collecting Federal reserve
o r a t t h e option o f s u c h Federal r e s e r v e b a n k t o
authorize s u c h M e d e r a l r e s e r v e b a n k t o c h a r g e t h e i r r e serve a c c o u n t s
o r clearing accounts:
provided,
hovever,
that a n y F e d e r a l r e s e r v e b a n k m a y r e s e r v e t h e r i g h t
its c h e c k c o l l e c t i o n c i r c u l a r
in
t o charge s u c h items t o t h e
reserve account o r clearing account o f any such bank a t
any t i m e w h e n i n a n y p a r t i c u l a r c a s e t h e F e d e r a l r e s e r v e
bank deems i t necessary t o d o so.
(5) Checks received b y a Fedsral reserve bank payable i n other d i s t r i c t s w i l l b e f o r w a r d e d f o r c o l l e c t i o n
upon t h e terms a n d conditions herein provided t o the
Federal reserve b a n k @ f the district i n which s u c h checks
are payable.
(6) T h e amount o f any check for which payment i n
actually a n d finally collected funds i s not received
shall b e charged back t o the forwarding bank, regardless
of whether-or n o t t h e check itself e a n b e returned.”
Inasmuch a s t h e s u g z e s t e d f o r m d e f i n e s t h e l i a b i l i t y
of Federal r e s e r v e b a n k s a n d a t t h e s a m e t i m e e m b o d i e s t h e
terms a n d conditions prescribed b y the Federal Reserve Board,
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Federal Reserve Bank of St. Louis
267
in t h e o p i n i o n o f t h e Committee, onjiections r a i s e d
by
weveral o f the reserve banks have b e e n met a n d the Committee hopes that t h e sug: asted f o r m will b e adopted b y all
of t h e r e s e r v e b a n k s f o r t h e s a k e o f u n i f o r m i t y w h i c h h a s
been r e c o g n i z e d
t o b e s o i m p o r t a n t a n d noc“ssary.
Topics submitted t o the Committee a t the May, 1924.
Conference
o f Governors,
44 the last Conrercnce o f Governors, a
number o f
topics w e r e b y vote submitted t o the Standing Committee
on Gollections, a n d these topics a r e considered i n this
report
i n the order i n which t h e y appear
minutes
i n the Secretary's
o f t h e Conference.
Possible Limitation o f Kind o r Dollar Amount o f
Non-Cash Items t o b e Handled b y the Federal Reserve
Banks f o r Collection.
In c o n s i d e r i n g t h e r e p o r t
o f t h e Committee
o n Voluntary
Services, t h e Conference o f Governors discussed t h e possibility o f limiting non-cash collection items handled
through t h e Federal Reserve System t o those o f §100,00
or more i n amount.
T h e Conference t h e n voted that t h e
matter b e refrerr:d t o the Standing Committee o n Collections
for further s t u d g and such reconmendation a s t h e Cowmittee
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Federal Reserve Bank of St. Louis
263
might c a r e
t o make w i t h respect
lar a i o u n t o f n o n - c a s h i t e s
both
t o t h e kind a n d dol-
t o b e handled b y t h e Federal
banks F o r s c o l lection.
It was undegstood b y the Cgnfc rence that t h e Committee s h o u l d b e a u t h o r i z e d
interested b a n k s
studies
t o invite representatives
t o participate
o f t h e a u e s t i o n raised.
i n its discussion
o f the
or
T h e Committee invited
an
of o p i n i o n f r o m c a c h o f t h e F e d e r a l r e s e r v e
banks e i t h e r
b y letter
o r through a
meeting o f t h e Conmittee.
representative
at a
N i n e o f the Federal reserve
banks s t a t e d t h a t t h e y w e r e n o t i n f a v o r o f l i m i t i n g t h e
kind o r d o l l a r a m o u n t o f n o n - c a s h c o l l e c t i o n items, t w o
stated t h e y were i n favor o f discontinuing t h e non-cash
collection function,
a m o n e stated i t could n o t give a
final opinion until the findings o f the Committee had bean
reported
t o t h e C O ,nference o f Governors
One o f t h e F e d e r a l r e s e r v e b a n k s r e p o r t e d a s i n f a v o r
of Ghiscontinuing t h e n o n - c a s h c o l l e c t i o n f u n e t i o n entirely,
submitted
t e the Comittee a
statement s h o w i n g t h a t
i t was
collecting a n abnormally h i g h percentage o f items o f
than $ 1 0 0 . 0 0
i n amount.
T h e Cownittee learned t h a t
a considerable p o r t i o n o f these s m a l l i t e m s c o n s i s t e d
of
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Federal Reserve Bank of St. Louis
269
city, t o w n s h i p , s c h o o l
o r c o u n t y warrants,
t h e place o f
payment o f which class o f items w a s difficult t o determine a n d t h e tine o f payment uncertain,
reported a
N o other bank
similar experience a n d t h e Committee feels that
this i s p u r e l y a
local c o n d i t i o n w h i c h s h o u l d b e c o r r e c t e d
either b y arranging t o handle these a s sash items whenever
possible
o r declining
t o a c e c p t them f o r c o l l e c t i o n u n l e s s
they a r e made payable a t a bank a n d have a definite maturaay.
The C o m m i t e e h a s s t u c i e d t h i s m a t t e r v e r y c a r e f u l l y
and i s o f t h e o p i n i o n t h a t i t i s n o t o n l y u n d e s i r a b l e
to
limit t h e kind o r dollar amount o f collection items, b u t
that i t w o u l d b e i m p r a c t i c a l
t o d o so.
cash c o l l e c t i o n i t e m s n o w h a n d l e d
b y t h e Federal reserve
eS >
banks
are
s o numerous
thet
T h e k i n d o f non~
i t would
3
2
2.028
s
b e difricult
o
i f not
entirely impossible t o limit t h e m i n such a way a s t o
uniformly a f f e c t
t h e volume
i n e a c h district.
I t . vould
be equally undesirable a n d impractical t o limit t h e class
of collection items t o those o f 5100.00 a n d over. While
in the vast majority o f cases, member banks d o n o t collect
all o f t h e i r n o n - c a s h i t e m s t h r o u g h t h e F e d e r a l r e s e r v e
banks, t h e y d o a s a
general r u l e r o u t e t h r o u g h t h e f e d e r a l
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Federal Reserve Bank of St. Louis
270
reserve -banits items o n pointe w h i e h are dirficult f o r then
to collect through other channels. T h e r s r o a r e , t o - w i t
the k i n d o r d o l l a r a m o u n t w o u l d b e i m p o s i n g a
hardship
on
member b a n k s s e c o n d o n l y t o t h e c o m p l e t e d i s c o n t i n u a n c e
of
the collection function,
In creases o f s e r v i c e C h a r g e
o n U n p a i d Items.
in c o n n e c t i o n w i t h i t s s t u d y - o f t h e p o s s i b i d i t y
of
placing limitations u p o n t h e kind a n d dollar arount o f
non-cash items, t h e Cornmitt:-e also considered a s a n alternative a
possible increase i n the amount o f the service
charge o n unpaid, unprotested items returned t o member
banks,
T h i s matter was also submitted b y the U mmittee
to e a c h o f t h e G o v e r n o r s
o f the Federal reserve banks
the r e p l i e s r e c e i v e d i n d i c a t e d a
divided opinion.
and
Only
one o f t h e r e s e r v e b a n k s r e p o r t e d a n y c o n s i d e r a b l e v o l u m e
of n o protest items being handled f o r its member banks a n d
expressed t h e opinion that while I t derived a
considerable
revenue f r o m t h e J i f t e e n c e n t s e r v i c e charge,
i t was n o t
likely t h a t t h e s e u n d e s r i a b l e i t e m s w o u l d b e e x c l u d e d
from. t h e s y s t e m i f t h e s e r v i c e c h a r g e w e r e increased.
an alternative,
A s
i t sugsested t o t h e Cormittee t h a t i t con-
sider t h e advisability o f limiting t h e class o f collection
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Federal Reserve Bank of St. Louis
to b e handled through t h e Federal Reserve »*ystem t o
SUDTECT
O O proves. ( 4 h =noy said.
of t h e o p i n i o n t h a t t h e l a r g e v o l u m e
T h e Gommittee
is
o f n o protest items
being handled b y only o n e o f the reserve banks i s a purely
local c o n d i t i o n w h i c h s h o u l d b e c o r r e c t e d
other t h a n b y i m p o s i n g a
in
restriction against these items
throughout t h e system.
The C o m m i t t e e f e e l s t h a t t h e i m p o s i t i o n o f a
charge
o n unnvaid, u n p r o t e s t e d c o l l e c t i o n items
service
i s neces-
sary i n order t o prevent t h e misuse o f the collection
facilities b y the attempted collection o f undesirable
In a general way, t h e service charge h a s resulted i n keeping u n d e s i r a b l e
n o protest drafts
though t h e uniform rifteen cent service charge i s now
slightly below t h e actual cost o r collection. I n a s m u c h a s
the s e r v i c e c h a r g e o n u n p a i d i t e m s i s i n t h e n a t u r e o f 4
penalty,
i t would b e desirable
somewhat
i n excess
t o increase
i t t o a n amount
o f t h e present c o s t o f handling n o n -
cash c o l l e c t i o n items, p o r s i b l y t o t w e n t y o r t w e n t y - f i v e
cents.
T h e C o r m i t t e e r e c o g n i z e s t h a t t h e r e a r e t w o objec-
tions which m a y b e raised against a n increase i n the ser-
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Federal Reserve Bank of St. Louis
sive charge; f i r s t , t h a t t h e p r e s e n t s e r v i c e c h a r g
paid i t e m s h e s a p p a r e n t l y a c c o m p l i s h e d i t s p u r p o s e
district e x c e p t o n e ; s e c o n d , t h a t a n increase
time might b e construed a s a n e r a n
on this e l a s s o f items.
i n every
a t this
t o realize a 2 pret it
T h e Committee, t h e r e f o r e , r e c o m -
mends t h a t t h i s q u e s t i o n b e c o n s i d e : e d
b y t h e Conference
of Governors, a n d that t h e amount o f the service charge
be f i x e d b y them.
W h e t h e r t h e amount decided u p o n i s
rifteen, t w e n t y o r twenty~five c e n t s ,
i t i s q i t e clear
that t h e s e r v i c e c h a r g e w o u l d f a i l t o a c c o m p l i s h i t s p u r -
‘pose unless i t i s strictly enforced b y every Federal r e serve bank, e n d the charge imposcd o n all non-cash collection
m
s r e t u r n e d u p p a i d a n d unprotested.
Preparation
of a
er
Uniform Non-Cash Collection
Circular.
The Committees w a s r e q u e s t e d
pare a
b y t h e Conference
t o pBe-
new uniform non-cash collection circular covering
the s u b j e c t s
o f u n i f o r m endorsements, g u a r a n t e e
o f prior
endorsements, a n d defining t h e terms u s e d b y Federal r e serve b a n k s
i n e r f e c t i n g n o n - c a s h collections,
a n d t o sug-
gest a n y c h a n g e w h i c h t h e C o m m i t t e e f e l t s h o u l d b e m a d c
ag. 8- result o f its s t u d y
I t was understood b y the Con-
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Federal Reserve Bank of St. Louis
Ue
ference t h a t a
recommended
draft o f t h i s u n i f o r m c i r c u l a r
b y t h e Comnittee
b e sent
a s finally
t o e a c h Hederal reserve
its approval a n d i f all banks agree t h e circular
should b e issued, b u t i f there w a s n o unanimous agreement
the c i r c u l a r s h o u l d b e r e f e r r e d
t o t h e next Conference
of
GOVveryocs [ O r i t s C o n e c e r e a1 ome,
In t h e f i r s t r o p o r t
ence o f G o v e r n o r s
o f t h i s Vtommittee t o t h e C o n f e r -
i n October, 1 9 2 2 ,
absolute u n i f i r n i t y
i t vas pointed o u t that
i n the circulars w a s entirely imprae-
tical a n d n o t all t o g e t h e r d e s i r a b l e ,
portions
b u t that certain
o f t h e c i r c u l a r s s h o u l d b e identical. A
number
of paragraphs covering t h e more important subjects w e r e
recommended
t o a n d approved
b y t h a t Conference.
The C o m m i t t e e f e e l s t h a t t h e p a r a g r a p h s r e c o m m e n d e d
in i t s f i r s t r e p o r t f u l l y c o v e r t h e v a r i o u s i t e m s t o w h i c h
they r e l a t e a n d s h o u l d b e i n c o r p o r a t e d
lection circulars,
i n the revised col-
a n d that i n addition t o these para-
graphs certain others s h o u l c e
b incorporated a n d t h e liability paragreph should b e slightly modified.
Uniform F n d o r s e m e n t s
dorsenents
a n d Guarantee
o f Prior % n -
o f N o n - C a s h Collections.
Tt w a s s u g v e s t e d t h a t t h e C o m m i t t e e s h o u l d c o v e r t h e
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Federal Reserve Bank of St. Louis
274
ouestion o f u n i f o r m e n d o r s e m e n t s
of p r i o r e n d o r s e m e n t s .
on this m e s t i o n ,
a s well a s t h e guarantee
B e f o r e making
a n y recommendations
l e Cormittee d e s i r e s
t o point o u t t o
the C o n f e r e n c e r e a s o n s w h y i t d o e s n o t a p p e a r t o b e desir-
able that t h e wording o f all endorsements o n non-cash collection i t e m s s h o u l d b e a b s o l u t e l y uniform,
a s well a g
reasons w h y t h e guarantee o f prior endorsements should not
be m a d e compulsory.
it t h e p r e s e n t t h m e t h e r e a v p e a r s
t o b e n o uniformity
among commercial banks generally w i t h respect t o the form
of endorsement u s e d b y them o n non-cash collection items.
Some b a n k s g u a r a n t e e p r i o r e n d o r s e m e n t s w h i l e o t h e r s
Some b a n k s m a k e t h e i r e n s o r s e m e n t s r e s t r i c t i v e
ing t h e p h r a s e " f o r c o l l e c t i o n only",
d o not.
b y includ-
o r “for collection
and c r e d i t
t o t h e a c c o u n t of", ’ o r ‘ f o r c o l l e3c t i o n a n d re-~
mttance",
o r phrases o f similar meaning.
T h e r e is n o
uniformity i n court decisions a s t o the effset o f restrictive endorsements,
S o m e courts h a v e held t h a t a
restric-~
tige e n d o r s e m e n t m a k e s t h e e n d o r s e e t h e a g e n t o f t h e
endorser a n d t h a t s u c h a n e n d o r s e m e n t
purpose
i s n o t made f o r t h e
o f transfer a n d s a l e a n d d o e s n o t c a r r y w i t h i t a
guarantee
o f previous e n d o r s e m e n t s .
U n i f o r m i t y o f endorse-
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Federal Reserve Bank of St. Louis
75
ment c a n o n l y
b e obtained
b y adopting a s a
a form o f endorsement including a
general r u l e
restrictive clause,
or
an e n t i r e l y u n r e s t r i c t e d f o r m o f e n d o r s e m e n t s u c h a s i s
commonly u s e d o n b a n k checks.
C e u r t decisions
tates a r e o f t e n t h e d e t e r m i n i n g f a c t o r s
i n various
a s t o the form
of e n d o r s e m e n t u s e d o n c o l l e c t i o n i t e m s a n d i f t h e Federal r e s e r v e b a n k s s h o u l d a t t e m p t
generally t o i n c l u d e a
t o force member b a n k
guarantee
o f p r i o r endorsements,
reat d e a l o f c o n f u s i o n w o u l d b e created.
tive f o r m i s adopted,
include a
I f t h e restrie-
i t would obviously b e impossible
to
guarantee o f prior endorsement because t h e in-
clusion o f such a guarantee would have t h e effect o f removing all restrictions a n d t h e wording o f the endorsement
would c l e a r l y b e contradictory.
including a
a
. t h e Pestriotive f o p e
guarantee o f prior endorsement i s adopted,
the e n t i r e b u r d e n o f p a s s i n g u p o n t h e v a l i d i t y o f p r i o r e n dowpsement w i l l b e f o r c e d u p o n t h e b a n k w i t h w h i c h t h e
£ Ou «CO Ud eG ue On~
The committee respectrully begs t o draw t h e attention
of t h e C o n f e r e n c e
t o t h e Cornmittee!s r e c o m isndation a s i n -
cluded i n i t s r e p o r t
t o t h e November 1 9 2 3 Conference
of
Governors, t h a t a s a general practice Federal reserve banks
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Federal Reserve Bank of St. Louis
276
to n o t g u a r a n t e e p r i o r é n c o r s e m e n t s
payment
o n s u c h items unless
o f a n y s u c h items i s contingent u p o n t h e guarantee
of p r i o r e n d o r s e m e n t s
b y a
FPedstral r e s e r v e
bank and then
only i n cases w h e r e p r i o r e n d o r s e m e n t s h a v e b e e n guaran-
teed b y the next preceding b a n k endorser.
T h e Committee
is o f the opinion that before this matter i s definitely
decided, a n d a uniform paragraph f o r inclusion i n the noncash c o l l e c t i o n c i r c u l a r s
i s adopted,
t h e Conference
should g i v e t h e m a t t e r f u r t h e r c o n s i d e r a t i o n
possible l e g a l complications.
mittee,
I
s o a s t o avoid
n the opinion o f t h e Com-
i t i s desirable t h a t this omuestion b e again refer-
red t o t h e C o u n s e l f o r e a c h F e d e r a l r e s e r v e b a n k f o r a n
opinion a s t o t h e n e c e s s i t y f o r a
guarantee
o f prior e n -
dorsements o n non-cash ‘collection items, bearing i n mind
that c o m m e r c i a l b a n k s o f t e n a d o p t t h e r e s t r i c t i v e f o r m f o r
a definite purpose a n d i n order t o avoid responsibility.
°
Definitions
o f Terms u s e d b y Federal R e s e r v e B a n k s
in Erirecting Non-Cash Collections.
The C o m m i t t e e r e c o m m e n d s t h a t t h e f o l l o w i n g u n i f o r m
paragraph c o v e r i n g t h i s s u b j e c t b e i n c l u d e d
i n the non-
cash c o l l e c t i o n c i r c u l a r :
‘Special attention i s called t o the fact that
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Federal Reserve Bank of St. Louis
tel
in accordance w i t h t h e practice prevailing amoing
Federal reserve banks, c e r t a i n terms a r e used i n requesting t e l e g r a p h i c a d v i c e s
i n connection w i t h col-
lection items.
o f e a c h o f these t e r m s
aS c o n s t r u e d
T h e meaning
b y t h e Federal reserve banks
below a n d m e m b e r b a n k s a r e r e q u e s t e d
t o use them i n
accordance w i t h t h e s a m e u n d e r s t a n d i n g
ing.
i s stated
o f their mean-
F o r t h e protection o f this bank, a s well a s
the p r o t e c t i o n
o f i t s members,
t h e Federal Reserve
Bank O F ..sc<iceree W A l l P l s ¢ e the-follewinge i n t e r p r e s
tations u p o n these terms,"
"WIRZ PAYENT" when it is desired that the collecting
agent f u r n i s h t e l e g r a p h i c a d v i c e t h a t a c t u a l p a y m e n t h a s
been m a d e b y : the d r a w e e
o r payer.
I t will
b e assumed that
banks requesting "WIRE PAYMENT" are interested i n knowing
that a n i t e m h a s b e e n p a i d t o t h e c o l l e c t i n g a g e n t a n d a r e
not p a r t i c u l a r l y i n t e r e s t e d
i n receiving proceeds i m m e -
diately f o r reserve purposes.
when @
I t will b e understood that
Federal r e s e r v e b a n k g i v e s s u c h arn advice o f payment,
it d o e s n o t n e c e s s a r i l y i m p l y t h a t a c t u a l l y c o l l * c t e d f u n d s
are i n p o s s e s s i o n o f t h e F e d e r a l R e s e r v e B a n k ,
TR
NON-PiYMENT when a telegraphic advice of @ishonor
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Federal Reserve Bank of St. Louis
Onby- Ess desired.
Fave" o r “WIRE PAYMENT o r NON-PAYMENT" when a
prompt a d v i c e o f payment
o r non-payment
b y drawee o r
“VIRE CREDIT" when a telgraphic advice o f final o r
actual p a y m e n t a n d o f credit f o r r e s e r v e p u r p o s e s
i s de-
sired:
Uniform L i a b i l i t y P a r a g r a p h
i n Non-Cash Collec-
tion Uireieeers
The report o f the r m i t t e e
Conference
t o t h e Uctober, 1922,
o f Governors r e c o m e n d e d a
paragraph w h i c h w a s
approved and adopted b y the Conference.
I n the opinion o f
the C o m m i t t e e t h i s p a r a g r a p h r e a u i r e s o n l y a
fication a n d recommends ‘that i t b e made a
slight m o d i -
part o f the n e w
non-cash collection circulars w i t h t h e following changes:
first, that these b e inserted the words " b y such act" i n
order t h a t t h i s p a r a g r a p h m a y b e i n c o n f o r m i t y w i t h t h e
jability paragraph i n the check collection
circular, s
Biven a d v i c e
a
+
t t h e last phrase “ o r when they have
o r payment"
b e omitted
s o that t h e paragraph
sending maturing notes, b i l l s o r other
ee
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Federal Reserve Bank of St. Louis
non-cash i t e m s
t o the Federal Reserve
Of C O n o O U N e r P e n e r a l
Bank
r e s e r Ss: Deve t e s c t
be u n d e r s t o o d
of
T o r our
t o have agreed
to
Conditions O 7 1 thie c i r c u l a r a n o to. beave
thet i n r e c e i v i n g s u c h items t h e P e d * r a l r e s e r v e b a n k s w i l l
only a s t h e c o l l e c t i n g a g e n t
o f t h e s e n d i n g bank; t h a t
Federal reserve banks will b e responsible o n l y f o r
cue o O m e
s e and c a r e
i n forwarding
Federal r e s e r v e |
o r presenting s u c h
c s a r e authorized
to
present o r forward s u c h items, f o r payment i n cash o r
epaft, direct t o the bank o n which they a r e drawn,
at w h i c h t h e y a r e p a y a b l e
lectable,
o r through which t h e y a r e col-
o r t o oresent t h e m direct t o the person, f i r r
or corporation o n which they a r e drawn f o r
cash o r b a n i check,
o r
a
i
r d i s ere P o r w a r d
sim t o a n o t h e r a g e n t w i t h t h e s a m e a u t h o r i t y t h a t t h e y
haveé t o present
excent
o r t o r w a r d t h e r f o r payment;
a s herein provided,
t h e Federal
a n d that,
reserve banks
shall b e h e l d l i a b l e o n l y w h e n t h e y h a v e r e c e i v e d p a y n e n t
in c a s h o r i n t h e proceeds
o f t h e b a n k d r a f t o r check."
One o f t h e r e s e r v e b a n k s h a s r a i s e d t h e p o i n t t h a t
the condluding phrase, " o r when they have given advice o f
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Federal Reserve Bank of St. Louis
280
payment" w h i c h a p p e a r s
i n t h e paragraph n o w uniformly
used b y the Federal reserve banks i s unnecessary f o r their
protection a n d t e n d s t o c r e a t e a
false impression.
T h e
opinion h a s b e e n exvoressed t h a t l e g a l c o m p l i c a t i o n s m i g h t
42result o f t h e i n c l u s i o n o f t h i s p h r a s e a n d t h a t
the recovery o f the amount o f a collection i t e m erronsously
credited t o a member bank, e v e n though the member b a n k
had n o t a c t e d u p o n t h e e r r o n e o u s a d v i c e o f credit, w o u l d
be exceedingly difficult i f this phrase were included.
Authority o f a
Payment
of a
Federal R e s e r v e B a n k t o A c c e p t
Collection Item, a
in
Brank Draft g i v e n
in exchange f o r t h e craft o f the Drawee.
This w a s a
Conference
topic submitted f o r consideration t o the
o f Governo.:s a n d r e s u l t e d
i n t h e f o l l o w i n g vote:
"That the Standing Committee o n Collections b e
requested t o study this topic i n connection with
its c o n s i d e r a t i o n
o f Regulation J
as voted b y the
Conference."
Previously t h e C o n f e r e n c e h a d v o t e d t h a t t h e p r o p o s e d
draft o f R e g u l a t i o n J
b e r e f e r r e d b a c k t o Mr. Wyatt, C o u n s e l
for the Federal Reserve Board, w i t h t h e reauest t h a t h e
permit the Standing Committee o n Collections t o confer
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Federal Reserve Bank of St. Louis
281
with h i m r e l a t i v e
t o i t s p r o v i s i o n s b e f o r e f i n a l adoption.
Later t h e y v o t e d t h a t i n o r d e r t o e x p e d i t e f i n a l considera-~
the Chairman o f the Committee b e reed t o represent i t i n conferring w i t h Mr. ‘watt,
relative t o the f o r m o f the regulation. Obswiously, t h e
Committee i s not i n a.position t o study this matter i n
connection w i t h t h e p r o p o s e d d r a f t o f R e g u l a t i o n J
was s u b m i t t e d
which
t o t h e Conference, b e c a u s e R e g u l a t i o n J ,
series o f 1924, w a s issued b y the Federal Reserve B o a g
onsideration a n d u v o n recornmendation o f t h e B o a r d ' s C o u n s e l a n d - t h e C h a i r m a n o f this C o m mittee,
T h e Committee understand
by t h i s t o p i c i s w h e t h e r
o r not a
that t h e point raised
Pede S
v e bank
in forwarding checks o r non-cash collection items t o a
pank f o r c o l l e c t i o n a n d i n a c c e p t i n g t h e r e f o r a
remittance
consisting o f a bank drart drawn b y the remitting b a n k
upon a n o t h e r b a n k , h a s t h e r i g h t t o a c c e p t s t i l l a r o t h e r
bank drafts i m vermitpeance. t o r t h e T i r s t b a n k d r a r h e
The C o m m i t t s c e h a s c o n s i d e r e d
Series
o f 1924,
t h e n e w R e g u l a t i o n Jd,
i n connection w i t h t h e question raised a n d
is o f t h e o p i n i o n t h a t t h e r e i s s o m e d o u b t a s t o w h e
or n o t t h e n e w R e g u l a t i o n J
protects a
Federal r e s e r v e
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Federal Reserve Bank of St. Louis
+
k
against liability i n case t h e original
n
a
b
t
draft i s n o t c o n v e r t e d i m m e d i a t e l y i n t o a c t u a l l v a n d f i n a l Sy OLLSCLGG:
P u n d s . T h e Committee reconmends t h a t t h e
question b e submitted b y each Federal reserve b a n k t o its
Counsel f o r a n opinion.
Withdrawals
frou-the
P a r List.
The May, 1924, Conference. o f Governors, v o t e d that
in order t o protect b o t h member banks a n d Federal reserve
the Standing C o m m i t t e e o n Collections
be r e d u e s t e d
t o formulate a
uniform procedure
t o b e fol-
lowed b y all reserve banks i n handling c a s h items received
cirect f r o m t h e m e m b e r b a n k s o f o t h e r d i s t r i c t s d r a w n o n
banks w h i c h h a v e b e e n r e m o v e d
issues
f r o m the par list between
o f the #ederal Reserve Board's semi-annual
par
list o r t h e m o n t h l y s u p p l e m e n t s t h e v e t o ,
The Committee recognizes t h a t i t i s practically
impossible t o keep a l l member banks promptly inrormed o f
the r e m o v a l
o r withdrawal
o i t h e names o f non-member b a n k s
from the p a r list a n d that, consequently, t h e r e will b e
recurring i n s t a n c e s w h e r e a
direct s e n d i n g m e m b e r b a n k
will forward f o r collection checks d r a w n upon banks which
camot b e collected because the banks upon which they are
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Federal Reserve Bank of St. Louis
285
drawn have b e e n r e m o v e d f r o m t h e p a r list, a n d 1 2 . Send,
Danis
n o t aware o f that vact-
T h e C o m m i t t e e , therefor
recommends t h a t t h e f o l l o w i n g p r o c e d u r e
Federal r e s e r v e b a n k s a n d b r a n c h e s
b e adopted
b y the
i n order t o protect
the sending bank a s well a s t h e receiving #ederal reserve
bank o r b r a n c h a g a i n s t t h e p o s s i b i l i t y
i. A n y item under #500,00
and r e t u r n e d
with a
of
s h o u l de
b charged back
t o t h e direct s e n d i n g member b a n k
memorandum o r notation t o t h e effect t h a t
the b a n k u p o n w h i c h t h e i t e m i s d r a w n h a s b e e n
removed f r o m t h e p a r l i s t a n d , t h e r e r o r e ,
item i s n o t c o l l e c t a b l e
through
the
the Fed ral Re-
serve System.
Any item o f $500.00 o r over should b e held b y the
veceiving Federal reserve b a n k o r branch a n d t h e
direct s e n d i n g m e m b e r b a n k f r o m w h i c h t h e i t e m w a s
received should }
b i t i
by wire, t h a t t h e
bank upon which t h e item i s drawn has b e e n removed f r o m t h e p a r l i s t and. t h a t t h e i t e m i s n o t
sollectable t h r o u g h t h e F e d e r a l R e s e r v e S y s t e m ,
and should b e reauested t o forward instructions
ag bor t h e d i s p o s i t i o n
o f t h e 2t6n,
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Federal Reserve Bank of St. Louis
284
The C o m m i t t e e a l s o r e c o m m e n d s t h a t a s a n a d d e d p r o tection a g a i n s t l o s s t o t h e F e d e r a l r e s e r v e b a n k s a n d
branches,
t h e Federal R e s e r v e B o a r d print u p o n t h e title
page o f the semi-annual Inter-District Collection System
Booklet,
a n d t h e monthly supplements thereto,
t h e follow-
ing: "Subject t o change withowt notice."
Stucy o f Cash Items Protested b y All Federal
Reserve B a n k s ,
The Hey, 1924, Conference o f Governors v o t e d that t h e
Standing C o r m i t t e e
o n Collections
b e requested
t o make a
study o f the cash items protested b y all Federal reserve
banks a n d branches f o r a period o f three months a n d that
these c h e c k s s h o u l d b e d i v i d e d i n t o d i f f e r e n t c l a s s e s
as
to amount.
The C o m m i t t e e h a s c o m m u n i c a t e d w i t h e a c h o f t h e
ral r e s e r v e b a n k s
a n d obtained information
a s t o the
cash items payable i n Federal reserve b a n k a n d branch
cities w h i c h w e r e p r o t e s t e d
and b r a n c h e s d u r i n g a
b y t h e Federal reserve b a n k
period o f t h r e e months.
T h i s in-
formation h a s b e e n t a b u l a t e d a n d i s a t t a c h e d h e r s t o m a r k e d
e
o
a
The Committee understands t h a t t h e request t o study
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Federal Reserve Bank of St. Louis
285
cash items protested arose o u t o f consideration b y
Conference o f Governors o f the increasing volume o f
notarial w o r k i n t h e s e v é r a l r e s e r v e b a n k s a n d that: t h e
Governors w e r e o f t h e o p i n i o n that’ t h e l a b o r i n c i d e n t
to
handling this class o f items might b e somewhat reduced
if t h e p r - s e n t g e n e r a l w a i v e r . o f p r o t e s t
o n all. i t e m s o f
$10.90 a n d u n d e r w e r e t o b e r a i s e d t o $ 2 0 . 0 0 a n d under.
A vast majority (about 85%) o f t h e commercial banks
now use t h e $10.00 limit.
T h e American Bankers Associa-~
tion some time a g o advocated increasing t h e linit t o
$20.00.
N o definite stcps, however, were taken b y the
Association
t o b r i n g t h i s about, p a r t l y b e c a u s e t h e o r f i -
s of t h e C l e a r i n g House Section h a d t h e impression
Federal r e s e r v e b a n k s w e r e o p p o s e d t o
raising t h e l i m i t t o $20.00.
The C o m m i t t e e u n d e r s t a n d s f r o m t h e S e c r e t a r y o f t h e
Clearing House Section o f the American Bankers Association
that a t the next meeting o f the executive committee, t h e
latter part o f September, another attempt will b e mace t o
work o u t a
plan f o r t h e adoption o f t h e 2 0 . 0 0 0 minimum.
Clearing House Section,
the i n i t i a t i v e
i t i s understood, w i l l take
i n bringing t h i s matter b e f o r e t h e l n k e r s
qQ
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Federal Reserve Bank of St. Louis
286
of the country, a n d will u s e every possible effort t o
make t h e p l a n s u c c e s s f u l
i r adopted
b y t h e executive c o n -
mittee, p r o v i d i n g t h e y h a v e t h e f u l l e s t c o o p e r a t i o n
the F e d e r a l H e s e r v e Board,
a n d t h e Governors
of
o f t h e Pederal
reserve banks.
The Cornmittee b e l i e v e s t h a t a s 4
measure
in the operation o f Federal reserve banks a
o f economy
waiver o f pro-
test o n all items o f y20.90 a n d under instead o f the
present waiver o f protest o n all items o f $10.00 a n d under
would have little,
i f any effect,
i n reducing t h e cost o f
handling unpaid items between g10.00 a n d $20.00,
a s the
=
hm dling o f these items a n d the accounting incident t h e r e to i s p r a c t i c a l l y t h e s a m e w h e t h e r t h e s e u n p a i d i t e m s a r e
protested o r not.
The C o m m i t t e e
i s o f the opinion that t h e policy o f
the F e d e r a l r e s e r v e b a n k s w i t h r e s p e c t
protest i t e m s s h o u l d b e g o v e r n e d
to a
limit o f
b y t h e practice
i n effect
with commercial banks generally 2 n d recommends, therefore,
that t h e present 610.00 minirum b e continued until commercial b a n k s g e n e r a l l y a d o p t a
now i n e f f e c t .
policy d i f r e r e n t f r o m t h a t
287
Report
o f all C i t y checks protested
b y Fed: ral R e -
serve B a n k s a n d B r a n c h e s d u r i n g t h e m o n t h s o f
Mareh, A p r i l a n d May, 1924,
Gi0.0 G15.01 $20.01 8 2 5 , 0 0
to
t
o
t
o
a
n
P e r c e n t a g e
d
o
15700-20560 2 6 , 0 0 = ater.
Boston
2
New York
0
6
Phila
6
4
2
2
8
1
o
4
e @3
.
4
1 2 . 2
7 2,583 3 , 5 1 9
1 3 . 5
y OTS 1 , 4 3 8
,
Chicago
a g a r
d
583
L
1
£2,156
8 1,960 m
Richmond .
Atlanta
T o t a l u n d e r $20.00.
1 6,804
9
Cleveland
a o e .
f items
1
6
.
2
4
1
6
.
8
3 , 0 9 5
1
5
6
5
7
e
5
S
St. Louis ‘
b
ha
Minneapolis
Kansas C i t y
Dallas
-S$an Fran. .
|
Total 2 , 7 6 6
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
S
1
APM oe
0
.
S 8 5
Number under $20.00
Percentage
o f total
Protest Fees
On items $10.01 t o $15.00
$ 5 , 2 1 9 . 4 3
On items $15.01 t o $20.00
4 , 3 3 0 . 5 9
$9,550.02.
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Federal Reserve Bank of St. Louis
288
Sovernor Young.
W
e h a v e a l l r e a d t h e report, M r .
Chairman. ilf{mneéapolis h a s b e e n t h e c h i e f c o m p l a i n e r
with r e g a r d t o previous r e p o r t s ,
motion t h a t t h i s r e p o r t
The Chairman:
and I
will n o w m a k e a
b e approved.
T h e r e a r e certain specific recommen-
dations i n the report,
a s I recall it, a n d some o f them
are l a i d o u t i n detail
o n t h e program.
Mp «
S
a
n Francisco I
ed s o m e t h i n g s t h a t a r e c o v e r e d
The Chairman:
t h i n k h a s recommnend-
i n t h e report.
T h e m o t i o n i s t o a p p r o v e t h e report.
Governor Young:
A n d t o complement t h e committee
o n
the snlendid w o r k they have done.
Governor Harding:
T E would l i k e t o discuss. t h a t itor
a moment, M r . C h a i r m a n , I
pains
have t a k e n considerable
t o look over this report a n d I
gestions t o make with regard t o it.
a few minutes
have j u s t a
f e w sug-
I t will n o t t a k e b u t
t o explain t h e amendments I
mece I n 1b, 2nd, 2): ta-16. i n o p e , T
would l i k e t o s e e
would l i k e
t o have
about r i v e m i n u t e s .
The Chairman:
G o v e r n o r Harding,
Governor Harding:
there
i s a
O n the first page o f the report
suggestion t h a t there s h o u l d
b e added
t o the
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Federal Reserve Bank of St. Louis
check c o l l e c t i o n c i r c u l a r ,
‘avery bank sending checks o r other c a s h items t o the
Pederad R e s e r v e B a n k O f
2 . . . 5es se OF. U O enOvoor: t o d e r a )
reserve b a n k direct f o r o u r account,
understood
b y such act will b e
t o have a g r e e d t o t h e terms a n d conditions
of this circuler e n d o f Regulation J
or the: Pederal
Reserve Board.”
Now, t h e c i r c u l a r l e t t e r w h i c h t h e B o s t o n B a n k h a s
issued contains a
short f o r m o f uniform liability suggest-
ed b y the committee, and, a s a legal necessity, o u r
counsel t h i n k s t h a t t h e b a n k i s a d e q u a t e l y p r o t e c t e d
the s h o r t form.
A
banks t h e r e a p n e a r s
s a
practical c o n v e n i e n c e
t o b e n o objection
by
t o member
t o adding t h e provi-
sions o f Section 5 , b u t our circular h a s only recently
been r e p r i n t e d a n d i t w o u l d b e m o r e c o n v e n i e n t
t o derer r e -
printing until s u c h time a s other changes a r e necessary,
when S e c t i o n 5
Now,
me
of R e g u l a t i o n J
could b e
o n p a g e five, I n c r e a s e
paid items, I
d o n o t k n o w what’ t h e o t h e r banks! e x p c r i e n c e
has been, b u t o u r o w n experience i s s u c h that w e find that
a 1 5 cent charge i s a s effective
non-cash i t e m s r e t u r n e d unpaid.
as a
2 5 cent charge
on
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Federal Reserve Bank of St. Louis
290
On page 9, under " refinitions o f terms u s e d b y Federal
reserve banks i n effecting non-cash collections", t h e committee recommends t h e following uniform paragraph covering t h i s s u b j e c t b e i n c l u d e d
circulat, UDiatereae) ave
i n the non-cash collection
p a r a g r a p h i s given,
comment i s that when w e are ready t o issue a
new circular
wé a r e w i l l i n g t o i n s s e r t t h e p r o p o s e d paragraph,
fer n o t t o i s s u e a
a n d our
b u t pre-
new circular m e r e l y f o r t h e purpose
of
including it.
Governor F a n c h e r :
when y o u i s s u e a
Y o u mean that you-will
insert
1 6
new circular?
Governor H a r d i n g Y O e - .
On p a g e 1 0 , a s t o t h e p a r a g r a p h " E v e r y b a n k s e n d i n g
maturing notes, b i l l s o r other non-cash itoms t o t h e FedOra Reserve B a n k o f ......,.",. and. so. forth, our: counsse)
coneurs i n the committee's sugzestion that f o r t h e
words “our account" i n the third line w e prefer t o use
the words “the. account of this bank",
Mr. Strater: :
Governor Harding:
i
1
Material change.
N o w , o n page 12, just about the
trys
topic “Yithdrawals
from par list", i n regard t o the
original r e m i t t a n c e d r a f t n o t b e i n g c o n v e r t e d i m m e d i a t e l y
aod
into a c t u a l l y a n d f i n a l l y c o l l e c t e d f u n d s w h o n a
bank
draft i s g i v e n i n e x c h a n g e f o r t h e d r a f t o f t h e drawee,
Our -Coumsée|
, <4 o r o p i n i o n s h a t t h e n e w R e g u l a t i o n J
nob protest
does
d e r a l reserve banks a g a i n s t liability
in c a s e t h e ori;
a l r e m i t t a n c e draft i s n o t converted
immediately i n t o actually a n d finally collected funds, b u t
another draft accepted i n lieu o f the original.
does t h e b a n k ' s c i r c u l a r l e t t e r a f f o r d s u c h protection.
As a
matter
o f practice o u r rulcs a r e a g a i n s t t h e accept-
of s u c h a
second drairt.
O u r counsel
i s very clear
you c a m o t a v o i d l i a b i l i t y i f y o u t a k e a
Governor McKinney:
bank draft.
N o t e v e n b y contract?
Governor Harding:
T h a t i s his opinion, yes.
Governor Calkins:
Q u r counsel
Governor Harding:
H
i s o f t h e s a m e opin-~
e does n o t object t o trying it,
but h e j u s t w a n n s u s t h a t w e a r e n o t g e t t i n g anywhere.
Governor Calkins: I
a m willing t o g o further t h a n
your c o u n s e l a n d s a y t h a t v e o u g h t n o t t o e s c a p e liability.
That
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
She Federal reserve b a n k should surround itself with a
bomb p r o o f w a l l t o p r o t e c t i t s e l f f r o m t h e consedauences
negligence d o e s n o t a p p e a l
t o u s a t all.
of
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Federal Reserve Bank of St. Louis
ee
Governor Harding:
T h e r e i s one other thing, a b o u t
sent g u a r a n t e e i n g p r i o r e n d o r s e m e n t
o n non-cash
OUr Counsei- 1 s Of. t m 6 Gpintonm t h a t w h e n s
a bank has itself received
a n item w i t h a n unrestricted
rorm o f e n d o r s e m e n t a n d t h e n e n d o r s e s
i t i n the form used
ror non-cash items, t h a t endorsement does n o t constitute
a guarantee
o f prior endorssments.
Governor Calkins:
ance, I
have m
T h a t is a
matter
o f real i m p o r t -
opinion f r o m our counsel, w i t h citations,
which i s a l m o s t d i a n e t r i c a l l y o p p o s e d t o t h e c o n c l u s i o n
reached i n the Boston ban’,
H i s -comelusion Ts, a n d =
believe i t t o b e correct, t h a t w e cannot guarantee prior
endorsements without using words f o r that purpose. A
lot
of counsel f o r t h e reserve banks a r e going t o have a meeting here i n December, I
think, a n d this i s a matter o f
sufficient i m p o r t a n c e , o
t b e handed t o them for discussion.
Mp. Strater: I
think t h a t w o u l d b e a
very g o o d thing
to do, because a s a rule t h e average lawyer looks a t a
negotiable instrument o n l y from t h e legal point o f view
and d o e s n o t t a k e i n t o c o n s i d e r a t i o n
a t :
N
e Pact that
commercial banks generally, a n d Federal reserve banks
specifically, h a n d l e t h e same class o f items i n two differ-
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Federal Reserve Bank of St. Louis
ent ways, a n d t h e r e f o r e t h e d i s t i n c t i o n
i s rather
i n the
method o f handling t h a n i n the character o f the items.
The Chairman:
Y o u refer
t o t h e fact t h a t o u r custom-
is t o send direct a n d commercial banics d o n o t always d o
that,
b u t i n fact endeavor n o t t o d o i t a s a
Mr. Strater:
N o t exactly, Governor Strong. A
mercial b a n k will t a t e a
ite purpose,
possible,
rule.
con-
check for c o l l e c t i o n f o r a defin-
t h e purposcbeing
t o a v o i d responsibility,
i f
a n d n o t t o t u r n over t h e funds until t h e check
is c o l l e c t e d .
i
to a n y g r e a t extcnt.
g
a
l r e s e r v e b a n k does n o t d o that
T h e 8ame-is’ t r a c o f - d r a r t s a n d notes.
They d o n o t w a n t t o t u r n o v e r t o t h e i r c u s t o m e r s t h e p r o of t h o s e i t e m s u n t i l t h e y k n o w t h e y a r e a c t u a l l y c o l -
lected, a n d they w m t
from c v e r y l i a b i l i t y
t o relieve themselves,
i f possible,
i n connection w i t h their endorsement
on the instrument, because i f the endorsement i s guaranteed
specifically,
ically,
o r a l l prior endorsements guaranteed specif-
a n d i f the court holds t h a t a n endorsement
constitutcs
o r includes a
guaranty,
i n blank
t h a t means t h a t t h e
collecting b a n k i s liable a t any tiie, t h a t is, t h e collecting F e d e r a l r e s e r v e
bank
i s liableat
the c o l l e c t i n g a g e n t c o m e b a c k
a n y time
o n them with a
t o have
clain
o f
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Federal Reserve Bank of St. Louis
feorsed endorsement.
Governor Calkins:
T h e o n l y w a y that liability c a n
be a v o i d e d i s b y u s i n g w o r d s f o r t h e purpose.
Governor Harding:
T h e committee's report calls a t -
tention t o t h e d e s i r a b i l i t y
o f referring t h i s matter a g a i n
to counsel o f each o f the reserve banks.
T h e r e i s nothing
have r e a d t h a t i s c o n t r a r y t o t h e g e n e r a l t e n o r
in what I
of t h e report,
and I
want t o s e c o n d G o v e r n o r Y o u n g ' s m o t i o n
that t h e r e p o r t b e adopted.
Governor McDougal:
B e f o r e t h e vote i s taken, I
call
attention t o page 6 , where t h e committee recommends a n inerease i n the charge f o r handling non-cash collection items
which a r e n o t paid.
The Chairman: G e n t l e m e n ,
impossible
t o take action u p o n this report
great v a r i e t y o f e x c e p t i o n s
witha
i t i s going t o b e auite
i n view o f the
t o b e considered
i n connection
I f you will permit m e t o suggest a course o f
procedure t h a t w i l l f a c i l i t a t e a c t i o n ,
l e t u s take u p
each item, f o r instance, that sug ests itself t o Governor
Harding,
a n d a c t u p o n them.
Governor Harding:
I r you will read t h e report y o u
the committee does n o t s a y arbitrarily t h a t there
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Federal Reserve Bank of St. Louis
must b e a 25 cents charge, b u t that t h e matter should
be considered. I
d o not. c a r e to. o f f e r e i l t h e s e t r i t l i m e
verbal changes.
Governor Fancher:
a condensation
l
L might s u g g e s t t h a t M r . S t r a t e r
o f the recomendations,
a n d h e might
just r e a d t h o s e r e c o m m e n d a t i o n s f r o m t h e c o m m i t t e e
up i n t h e r e p o r t h é r e ,
a s set
i n onder t o g e t . t h e m c l e a r l y b e -
rere G h e conrerencé,;
The Chairman:
What I
take u p e x c e p t i o n s o f f e r e d
wanted t o accomplish was t o
b y anybody t o t h e recommenda-
tions in’ t h e r e p o r t a n d a c t o n t h e m separately,
adopt t h e r e p o r t a s a
a n d then
wholc w i t h t h e e x c e p t i o n s t h a t w e
have adopted.
L e t u s take u p the & 5 cent charge
Governor Young:
PATSS4
The Chairman:
A r e y o u willing t o hold that matter up,
Governor Young; u n t i l w e h a v e d e s l t w i t h s o m e o f these
matters i n v i d i d u a l l y ?
Governor Young: Y e s , M r . Chairman,
The Chairman:
A r e you, Governor Harding?
Governor Harding:
The Chairman:
Y e s .
T h e first question i s the charge o n
return items o f ron-cash collections,
a s t o whether t h a t
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Federal Reserve Bank of St. Louis
charge should b e 1 5 cents,
Governor Young: I
make a
Governor ‘ellborn: i
Governor Calkins: I
the charge.
2 0 o r 2 5 cents.
motion that i t b e 2 5 cents.
Widl s e c o n d 1 % ,
a m opposed
t o a n y increase
in
i d o n o t t h i n k i t w i l l a c c o m p l i s h anything:
Governor McKinney: I
Governor Fancher: I
agree w i t h Governor Calkins.
think i t is unwise a t this time
to raise t h e charge fea15 cents t o 2 0 cents o r 2 5 cents.
Governor g D o u g a l
a g r e e w i t h that.
Governor
Governor Seay: I
Governor |
mako a
T
h
feel t h e same w a y about it.
e
n I will withdraw m y motion and
motion that t h e charge b e 1 5 cents a n d that i t re-
main unchanged.
Governor ‘icDougals I
will second that.
(The motion, having b e e n duly seconded, w a s carried.)
Governor S e a y : 4
i s o n e thing, a p o a r e n t l y ,
a
that t h e committee h a d i n mind, a
charges
w e r e n o t always enforced.
T
yj
t i s that these
n c important
than a n y s u m t h a t m a y b e rixed.
The Chairman:
Governor S e a y ?
W i l l y o u orfer a resoltition
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Federal Reserve Bank of St. Louis
207
Governor Seay: I
move i t i s t h e s c n s e o f this c o n -
terence t h a t t h e c h a r g e
o n returned, u n p a i d c o l l e c t i o n i t e m s
fixed a t 1 5 cents shall invariably b e enforced b y each
Federal r e s e r v e b a n k .
Governor Harding:
(The motion, h a v i n g b é e n d u l y seconded;
Governor S e a y : I
w a s carricd.)
also m o v e t h a t a n y b a n i t h a t s o
desires may change the phraseology from “our account" t o the
words "the account o f this bank".
Governor Harding: I
second that.
(The motion, naving been duly seconded, w a s carried.)
The Chairman:
T h e opinion o f our counsel i s that
there i s n o m e s t i o n a b o u t t h e l i a b i l i t y o f a
bank w e r e i t accepts
a n exchange d r a f t
exchange d r a f t w h i c h h a s b e e n a c c e p t e d
collection item.
recommendation
T h e westion
o f t h e committee
rs
tion.
«ail.
I
i n paymentfor another
i n payment
o f a
i s what t o d o about t h e
i n t h a t respect.
T h e committee makes
j
Mr
. Strater:
reserve
n o recorenda-
t merely calls attention t o t h e fact t h a t
it i s difficult t o determine whether Regulation J
covers
that p o i n t o r not, a n d s u g g e s t s t h a t t h e a u e s t i o n b e subt o counsel
f o r t h e various Federal reserve banks.
The Chairman:
T h e sugzestion i s made that that i s
mittesd
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Federal Reserve Bank of St. Louis
298
an i m p o r t a n t p o i n t a n d t h a t i t s h o u l d b e s u b m i t t e d
t o the
meeting o f counsel t o b e held here o n the 5 t h o f December,
Governor Young: I
will make s u c h a motion.
Governor Norris: I
will second it.
Governor Seay: P e r h a p s itshould n o t b e covered, b e cause perhaps w e ought t o make ourselves liable.
Governor MeKinney: I
cannot agree with Governor
seay, f o r t h e r e a s o n t h a t w e a r e m a k i n g o u r b e s t e f f o r t s
to c o l l e c t t h e i t e m s a n d o u g h t t o f o r t i f y o u r s e l v e s a n d
protect o u r s e l v e s
i n every possible w a y w h e n w e a r e doing
the b e s t w e can,
Governor Y o u n g :
cerned,
I
n s o far a s Hinneapolis
i s con-
i f w e are liable i n this, w e are taking a
of a million dollars a
Governor S e a y :
liability
day.
B u t y o u h a v e n o t suffered b y reason
of i t , h a v e y o u ?
Governor Young:
the same.
W
N o , b u t t h e liability i s there j u s t
e have t o take these drafts
o r else g o out o f
the p a r c o l l e c t i o n business.
The Chairman:
I s n ' t t h e real cuestion whether
i t is
possible f o r t h e r e s e r v e b a n k t o p r o t e c t i t s e l f a g a i n s t
things o f that character b y anything t h a t i t may put into
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Federal Reserve Bank of St. Louis
299
a circular?
i f i t i s not pessible,
i s i t not simply a 4
qmestion o f p o l i c y a s t o w h é t h e r y o u a r e g o i n g t o t a k e
the r i s k ?
Governor Young:
O u r counsel advises u s that w e a r e
not liable under t h e circular w e have.
Governor Calkins: I
do not want t o prolong t h e dis-
cussion, b u t a s I said before i n referring t o this matter,
I d o n o t t h i n k t h e Pederal r e s e r v e b a n k s s h o u l d b e r e l i e v e d
of responsibility, a n d the bestadvice t h a t w e have i s that
the c i r c u l a r s n o w i n effect h a v e n o e f f e c t
o n that parti-
cular a s p e c t o f it.
Governor McKinney:
W h y wouldntt
i t be a
good i d e a t o
have M r . S t r a t e r a t t e n d t h i s m o s t i n g o f c o u n s e l
o f several
of t h e r e s e r v e b a n k s a n d discuss t h e s e m a t t e r s w i t h t h e m ?
The Chairman: I
think i t i s a
very important ques-
tion, especially important where w e find radical difference
of v i e w b e t w e e n c o u n s e l
f o r t h e reserge bank.
5
:
2S a
system m a t t e r a i d o n e b a n i c a n n o t a l t e r t h e t e r m s o f a
cir-
cular o f this character, without affecting t h e liability o f
other r e s e r v e banks.
T h e sugszestion t h a t t h e m a t t e r b e
discussed b y counsel o f the various reserve banks while
they a r e here together, strikes m e a s a very helpful one,
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Federal Reserve Bank of St. Louis
300
and t h e f o r m o f m o t i o n w h i c h o c c u r s
t o me to be a
wise one.
would b e t o h a v e t h e JYJonference s u b m i t t h i s q u e s t i o n t o
the Fed: ral Reserve Board, recuesting that i t a s k representatives
o f the Standing G r m i t t e e
representatives
o f t h e reserve banks
tend t h e m e s t i n g i n “ a s h i n g t o n
arrange w i t h counsel t o hear a
o n Collections a n d
t o b e selected
t o at-
o n t h e 5 t h o f December a n d
statement o f the case f r o m
them a n d t o render u s a n opinion.
Governor Y o u n g : I
will w i t h d r a w
m y motion a n d make
a motion t o t h a t effect.
Governor MeKinney: I
Mr. Strater:. I
Regulation J
will second it,
might s a y that when t h e amendment t o
was submitted t o t h e Board's counsel t h e y
also considered that particular phase o f i t and were o f the
opinion that there wasn't anything that y o u could p u t i n
Regulation J
which would carry through indefinitely o n the
question o f d r a f t s
i n t h a t manner;
t h a t liability would be-
gin after y o u h a d exchanged your first draft f o r another
Governor Valkins:
I
f i t d i d n o t b e g i n there i t would
berin-Leter O n s
Governor Seay:
H o w many steps would b e contemplated?
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Federal Reserve Bank of St. Louis
501
Mir. Straters:
t h a t i s j u s t t h e point.
Y o u cannot
:
the thing might b e carried o n indefinitely.
Y o u
aight change o n e draft f o r a m t h e r draft, a n d there would
be n o means o f determining w h e n your liability would begin
you a t t e m p t e d
t o cover it.
The Chairman:
W e have felt i n our bank, according
to w h a t iip, H a r r i s o n j u s t t e l l s m e , t h a t t h e n e w c i r c u l a r s
being p u t o u t c o v e r i n g
i s a n d other technical matters
make s o m a n y a t t e m p t g t o
sé
t h e Pederal reserve b a n k s f r o m
liability, e s p e c i a l l y l i a b i l i t y f o r i t s o v m n e g
or possible negligence, t h a t dissatisfaction h a s
which i s p r e t t y s e r i o u s
t h a t t h e reiteration o f saving
clauses i n the circulars, quotations f r o m Board regulations,
and s o forth, h a v e a
dissuieting effect.
liable f o r negligence,
face t h a t liability.
N o w , i f w e are
i t seems t o m e that w e ought t o
v
e w a n t t o r i r s t f i n d out: - h e t h e r
we a r e liable.
Now,
w e have this meeting
o f counsel c o m i n g along.
tly. B a k e r w i l l a t t e n d t h a t meeting.
of t h i s w h o l e p r o b l e m ,
Hisofrice
H
e i s making a
study
i s i n Cleveland, r i g h t
next d o o r t o t h e r e s e r v e b a n k , w h e r e h e c a n gét. i n con-
tact w i t h Mr, Strater a n d Governor Fancher, a n d i t seems
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Federal Reserve Bank of St. Louis
502
very r e a s o n a b l e
t o m c t o a s k this meeting
matter a n d g i v e a n o p i n i o n
Governor Seay:
I
The C h a i r m a n :
goula c a s e , ‘ “ y n a t I
o n it.
g h e counsel
N o , |
t o consider t h e
h
i n this p a r t i c u l a r ?
e i s counsel
i n the Pasca-
would l i k e t o h a v e f o r t h e N e w Y o r k
bank w o u l d b e a n o p i n i o n w h i c h w o u l d a n p e a r
t o b e a s con-
clusive a s a n o p i n i o n c a n b e b y counsel, t h a t w i l l s a t i s f y
the Fed:ral R e s e r v e B o a r d a n d e n a b l e u s t o a d o p t a
uniforn
Pprecries.
think,
i n o u r circulars.
i m p. Bakér',s opinion, I
would carry great weight with everybody.
Governor Seay:
I t would still remain a qmestion o f
policy, w h e t h e r t h e o p i n i o n o f counsel w a s u n i f o r m o r
whether
i t differed.
The Chairman:
w e l l
L s : for us.to decide 1 n each
case. G o v e r n o r Young m a y want t o g o ahead a n d assume
liahility o n his colleetions b y accepting a n exchange
draft f o r a n exchange drart--Governor Calkins:
M y . Chairman, t h e r e i s one cuestion
in this that I think isimportant, a n d that i s “yhether t h e
Federal r e s e r v e b a n k s
i n their o p e r a t i o n s w i t h t h e public
and their member banks, a n d with each other a n d s o o n
should b e relieved o f responsibility f o r exercising d u e
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
5038
diligence. i
c
The C h a i r m a n :
h
i
n
k t h a t t h e y s h o u l d o r c a n be.
P A C V e eeImOu
Governor Calkins:
I
O e
e r ore G o a n On,
t m a y b e g o o d policy,
o f course,
to decide that w e a r e going t o t r y t o avoid it.
Mr. Harrison:
C
t
e
COntevence
that w e vould b e liable i n a c c e p t i n g a
o F con
draft i n payment
of a remittance draft, t h e question vould b e then what this
conference
would w a n t t o d e c i d e a f t e r c o u n s e l h a d d e t e r m i n e d
that t o b e a fact, a n d w e might save s i x months! t i n e b y
passing
o n i t now.
The Chairman:
Governor
Tuy.
D
e y o u t h i n k -it woulda b e w i s e to. at-
o f e a c h b a n k t h a t h e s h o u l d n o t a c c e p t t h e liabil-
M r . Young undoubtedly will want t o accept it.
it i s a
qestion
o f policy,
I f
w h y should n o t that policy b e
decided u p o n i n each reserve bank, w i t h the result that i f
loss does occur i t falls u p o n t h e bank which,
i n the exer-
cise o f i t s discretion, a s s u m i n g t h a t t h e l a w i s a s i t is,
is willing t o assume t h e liability.
sent tg@overnor Y o u n g
I
n other words,
a n item for collection
i f we
a n d h e collected
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Federal Reserve Bank of St. Louis
504
it i n t h e f a c e o f advise
b y c o u n s e l t h a t h e assumed
liability i n accepting s u c h a draft, t h e loss would fall
upon h i m a n d h e c o u l d n o t p a s s i t b a c k o n u s u n d e r t h e t e r m s
of the.circular,
Governor Seay: ‘ U n l e s s h e wanted t o provide i n dealing with y o u that h e would n o t b e liable.
T h a t would bring
him i n controversy w i t h the other banks,
Mr. Harrisons: I
agree w i t h a l l y o u say, b u t w h a t I
meant w a s t h a t w e m i g h t d e c i d e n o w t h a t w e d i d n o t w a n t t o
put into t h e circular o f each Federal reserve b a n k a saving
clause which would exempt i t from liability f o r taking a
bank draft i n payment o f a remittance draft.
I f w e elimin-
ate t h e p r o v i s i o n a n d d o n o t i n c l u d e s u c h . a provision
in
this circulab, t h e r e i s n o reason i n the world w h y Governor
Young should n o t accept a
tank draft i n paymen
o f a remit-
tanee d r a f t i f h e wants t o .
Governor Young: I
think i t would b e better first t o
settle t h e q u e s t i o n w h e t h e r
w e a r e laible o r n o t through
this c o n f e r e n c e
“ W h a t t h e Minneapolis b a n k
o f counsel,
might d o from then o n I could n o t s a y a t this time.
I f
we have g o t t o assume liability every d a y under s u c h conditions a s w e had i n 1920, 1 9 2 1 a n d 1922,
i t will b e m y re-
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Federal Reserve Bank of St. Louis
395
eonmendation
t o t h e directors
o f our bank that w e d o mot
assume a n y such liability, a n d i f that breaks d o w n t h e par
collection system i t will break i t down, a n d that i s a i l
therc.i6
t o 1%.
The Chairman:
O
f course t h a t puts y o u i n a
position
where y o u a r e t h e u n w i l l i n g v i c t i m o f t h e o t h e r r e s e r v e
banks t h a t s e n d y o u c h e c k s f o r collection.
Governor Young:
them;
W h y , w e will j u s t send i t back t o
w e wontt t a k e it.
have t o b e a r i n mind.
kind o f r e g u l a t i o n
B u g There
2 s anovuier- p o i n t
we
d o e s n ' t m a k e a n y difrerence w h a t
w e g e t up,
lation t o t h e m e m b e r banks.
i t has g o t t o b e a
fair r e g u -
T h i s matter c a m e u p a
while a g o i n our district.
There
ern part o f the state. I
think h e runs a
bank, because I
Isn't that so?
short
i s a Swede i n the southpretty g o o d
never heard o r him before, a n d h e never
borrowed a n y t h i n g t r o m us.
H
e sot this Regulation J
our c i r c u l a r a n d h e s a t d o w n a n d r e a d i t over. I
with
do not
think h e k n e w w h a t i t w a s a l l about, b u t h e f i g u r e d t h a t
if i t was a
in his bank,
good thing f o r o u r bank
h e ought t o have i t
a n d h e s i m p l y t o o k e x c e r p t s f r o m it, s u b s t i -
tuted h i s o w n n a m e f o r t h e n a m e o f t h e M i n n e a p o l i s “ a n k
andsent i t back t o u s a n d asked u s t o sign i t first.
H e
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Federal Reserve Bank of St. Louis
oO) G
y
was ontirely within his rights, b u t i f the other member
banks d o the same thing you have got the whole system i n a
Por
ere te
t s att.
The Chairman:
Y o u ought t o hire that Swede, Governor.
Governor Norris:
W h a t d i d you do?
Governor Young:
y r o t e Him a
not s i g n t h e agreement,
t
h
i
long letter; I
n
did
k h e signed w i t h
us.
The C h a i r m a n :
opinion,
T h e first cuedtion
a n d t h e second m e s t i o n . i s a
Calkins:
r
o
n
r
e
v
The Chairman:
o
d
i s t o gé6ét a
legal
ouestion o f policy.
L e t t g h a v o t h e l e g a l o p i n i o n first.
G
i¢
o not think the motion tade was
seconded,
Governor Y o u n g ;
I
t was seconded.
G o v e r n o r forris
seconded i t .
The m o t i o n i s , a s I
phrase i t ;
L
attempted
to
o SCCOmaed.<
(The motion having been duly seconded, w a s car.ied.)
The C h a i r m a n :
D
o vou wish
t o discuss
t h e amestion
o f
policy a t t h i s t i m e ?
Governor Young:
The Chairman:
[ 0 0 -Het..
i
n the absence o f a ‘motion, i . Strater,
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Federal Reserve Bank of St. Louis
we t i l l t a k e u p t h e n e x t i t e m o f y o u r report.
ip. Strater:
T h a t i s w i t h d r a w a l s f r o m t h e p a r list.
Theroe
e ro i Vs en oC otb i1e cLt iO + n
h so: b
h he
a ti t
S oC eTi
t
o b e¥ f o l lwo wee dd ii n
cases where checks s e n t b y memt
dir-ct
t o another Federal reserve b a n k when t h e b a n k o n
which ils i s d r a w n h a s b e e n r e m o v e d f r o m t h e p a r list.
The Chairman:
T h a t i s a recoxmendation b y the com-
mittee a s t o how t h e items should b e treated, classifying
them i n items under $500 and items over $500.
ready t o a c t o n t h e r e c o m m e n d a t i o n
Governor Young: I
A r e you
o f the committee?
move t h e r e c o r m e n d a t i o n
o f the
CoOmmibrec- t e approved.
Governor Norris:
(The motion, h a v i n g b e e n duly seconded, w a s carried.)
The Chairman:
i - W a n t t o reteor to. one thing i n the
proposed n e w c i r c u l a r
t o t h e effect that w h e n a
bank g i v e s a
to a
warranty
member
reserve b a n k t h a t i t h a s r e e e i v -
ed t r o m i t s c u s t o m e r - - Governor t i c k i n n e y :
T h a t
i s o n t h e progran,
but
it
16: 6 % - in t h e report.
The Chairman: I
understand f r o m Mr. S t r a t e r
covered i n the report o f July.
i t is
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Federal Reserve Bank of St. Louis
308
lip. Strater:
T h e committ
on c a s h i t e m s protested,
m a d e reconendation
b u t subm é
exhibit showing the
resuiis
That h a s b e e n d i s c u s s e d f r o m t i n e t o
time
a s t o whether
I
m
d
b
O F NO: p r o b e s tb. 4 tems s n o u l o c o n —
tinue a t $10 o r b e increased t o weO.
vious conrerence, &
I
we w o u l d n o t c o n s i d e r
Committee
recall
T h e action a t a pre-
b g WOS-<bO- Ghe~ e l C o G t a a t
t h a t question unless
t h e Standing
o n C o l l e c t i o n s m a d e s o m e recom-endation,
A m I
eccrest “in. that, u r . H a r p i s e n ?
“pe Harrisons
Y e s .
The C h a i r m a n :
A n d
Governor Seay:
considered
i
n o recomisndation
y impression
t o make.
T h e A m e r i c a n Banizers A s s o c i a t i o n r e c o m -
mended t h e t e n d o l l a r l i m i t .
vention
i s that t h e committee
i t a n d h a d n o recommendation
Mir. Strater:
h a s b e e n made.
T h a t w a s stated a t their con-
i n Chicago.
The Chairman:
T h e natter
i s just submitted f o r con-
sideration without a n y recommendation fro“ t h e cormiittee,
then?
tip. Straters
The Chairnans
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Federal Reserve Bank of St. Louis
309
is w h e t h e r
w e shall m a k e a n y change
i n t h e present l i m i t
of t e n dollars?
Governor S e a y
v
e t h a t n o c h a n g e b e made, H r ,
Chairman,
Governor McDougal: S e c o n d e d .
Governor Valkins: I
making a
change, b u t I
a m very strongly i n favor o f
haven't a n y disposition t o stand o u t
SEOMeupeeaksoy
Governor Seay:
“ i e Gould n o t make a change unless t h e
change w e r e a d o p t e d t h r o u g h o u t t h e c o u n t r y b y c o m e r c i a l
banks,
because
i t would involve
v e r y complicated procedure,
Inasmuch a s i t a p p a r e n t l y h a g b e e n s e t t l e d t o t h e s a t i s fraction o f t h e m e m b e r b a n k s t h r o u g h o u t t h e c o u n t r y a n d t h e
banks generally, I
The Chairman:
t h i n k i t h a d b e t t e r b e l e f t there.
M r . Harrison calls attention t o t h e
last p a g e o f t h e report, w h i c h c a r i e s
tion b y t h e S t a n d i n g C o m m i t t e e
t h e recormenda-
o n Collections t h a t n o change
be made until t h e banks o f t h e country come t o u s with a
reguest
made.
t o t h a t eifect.
I
T h e motion i s that n o change b e
s there a n y further discussion?
(The motion, h a v i n g b e e n duly seconded, w a s carkied.)
Governor ‘igkinney:
T h e r e i s a n i m p o r t a n t recomvrenda-
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Federal Reserve Bank of St. Louis
310
tion h e r e t h a t 4 s a n a d d z d p r o t e c t i o n a g a i n s t l o s s t o t h e
dera
and
reserve b a n k s
t
h
e Federal Reserve i
Board print o n the title page o f t h e semi-annual interdistrict c o l l e c t i o n s y s t e m b o o k l e t ,
ments thereto,
notice."
fore m a k e a
"Subiect t o change without
the following:
in
That i s important,
motion t h a t
andad the m o n t h l y s u p p l e -
i t be p
Re
a
V v
feyeiinalueopay
and I
there-
snted t o
the request t o print that o n the booklet.
Governor Young:
will s e c o n d that,
(The motion,
been duly seconded, was carried)
having
Governor Calkins:
Federal r e s e r v e
banks
i n
With r e g a r d t o t h e c o u n s e l
of
conference
of
o n the w e s t i o n
whether w e h a v e l i a b i l i t y f o r t h e a c c e p t a n c e
in payment
o f aother,
o f a d jIraft
w e d i d not specifically decide
fer t o t h e m t h e w e s t i o n
o f whether
i t was necessary
use words t o avoid liability o n the endorsement.
that q u e s t i o n showvld
The Chairnan:
Governor C a l k i n s :
The Chairman:
be r e f e r r e d
t o reto
I think
t o them,
po y o u m a k e a
wotion t o t h a t e f f e c t ?
OOS.
Governor
fer t o the meeting o f counsel
Calkins m o t i o n i s t h a t w e r e of F e d e r a l R e s e r v e b a n k s t o
be held i n December t h e question o f whether i t i s necessary
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
to u s é w o r d s
i n the dndorsement
o n a check
e
l
i
t h e
reserve b a n k o f l i a b i l i t y f o r g u a r a n t e e i n g a l l p r i o r e n d o r s e ments, c h e c k s a n d n o n - c a s h items,
Governor Young: I
will s e c o n d that.
(The motion, having be en duly seconded, w a s carried.)
The Chairman: T
a - Pequest
e
1
ee e r Oper c O s p u b o n record
t o c u r S e c r e b a r y : that. i n - r e r e r r i n g
this
to t h e B o a r d ' s a t t e n t i o n h e c a l l t h e a t t e n t i o n
Board t o t h e fact: t h a t t h e r e L s a
counsel
q i esti1on
o f the
-divergencey -of opinion -of
o f t h e Federal reserve banks, w h i c h makes
i t de-
Sirable.
ip. S t r a t e r s
T h e o n l y o t h e r s i n g l e i t e m i n t h e re-
port t h a t h a s n o t b e e n a c t e d o n b y t h e c o n f e r e n c e
possible l i m i t a t i o n o f k i n d o r d o l l a r a m o u n t
items t o b e h a n d l e d
i s the
o f non-cash
b y t h e Federal reserve b a n k s f o r col-
lection,
Governor U a l k i n s :
W h a t i s t h e committee's recommer-
dation o n that?
Mr. Straters:
T h e recotmcndation o f the committee
is
that i t i s n o t only undesirable t o limit t h e kind o r dollar a m o u n t o f c o l l e c t i o n items, b u t t h a t i t w o u l d b e imppacGales Uma cloves omeciorr
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Federal Reserve Bank of St. Louis
ol
Governor Calkins: I
move that t h e Conmittcets
mendation b e approved,
Governor Seay:
W E L L
(The motion, having been duly seconded, was carried.)
The Chairman:
A s I
understandit, t h a t cnvers every-
thing i n t h e report.
lin. S t r a t e r :
Y e s , air.
The Chairman:
sponsibility
M r . Harrison i s charged with t h e re-
o f d«termining whether
o r not recommendations
involving a c t i o n b y t h e s e p a r a t e b a n k s a r e adoptedall t h e b a n k s a d o p t e d t h e r e c o w e n d a t i o n s
Ae
u m i t t e e report,
Governor Young:
Committee
Have
o f t h e October,
o r are there a n y exceptions?
Y o u mean t h e report o f the Standing
o n Collections?
Mp. Harrison:
e o .
Governor Young:
Mr. Strater:
W w e have n o t adopted them.
Y o u have adopted everything
letter which was recommended t o b s exchangec between Federal
reserve b a n k s o n direct sendings,
Governor Young:
h a v e y o u not?
T h e r e a r e some other things t h a t
need argument, before adopting them,
The C h a i r m a n ;
Y o u mean
s o far a s I can see.
i n addition
t o t h e letter?
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Federal Reserve Bank of St. Louis
515
Governor Young:
the letter.
If 1 6 was a
v
2
B o e n e c e s s a r y f o r u s t o send
e N a v e t a k e n c a r e o r e a c h particular bank.
mMnk that sent directly,
w e sent the. letter,
and everybody i s satisfied.
The Chairman:
B u t I mean y o u have n o t sent o u t a
blanket l e t t e r ?
Governor Youngs:
N
e sa.
pcm S T Cree ener. T h e r e i s a n o t h e r p o i n t h e r e t h a t h a s
a n d that is,
not b e e n d e f i n i t e l y a c t e d o n , i r . Chairman,
Derinition
o r t e r m s u s e d b y Federal r e s e r v e b a n k s .
The C h a i r m a n ?
G o v e r n o r Harding explained t h a t h e
would b e w i l l i n g t o i n c o r p o r a t e t h a t w h e n h e i s s u e d a n o t h e r
circular,
b u t that they h a d just issued a
circular a n d d i d
not w a n t t o m a k e a r o t h e r e d i t i o n u n t i l t h i s o n e g e t s a
LAG pee aOR Gers
‘ W h a t i s your pleasure
about
t h e definition
gentlenen?
Governor -~eay: I
move t h a t t h e r e c o r m e n d a t i o n
be
accepted.
Governor Young:
(whe motion, h a v i n g b e e n d u l y seconded,
lp. Strater:
w a s carried.)
T h e uniform liability paragraph with
pe,ard t o non-cash collection circular, w a s that specific-
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
ally a c t e d u p o n ?
The Chairman:
T h e r e was a
change m a d e a n d a c t e d o n
and i t carfied approval w i t h that exception,
Governor Baileys:y
m
o n this report.
I
m n , Coairman, I
not
a m going
t o vote
n the Tenth Federal Reserve District
we have given careful consideration t o the colisction o f
non-cash i t e m s .
member b a n k s
w
e find that only rive per cent
o f the Tenth District u s e non-cash collection
items; t h a t i t costs u s 350,000 a
EEenm C o l lectiona.
W
per c e n t o f o u r b a n k s
e think
year t o make ron-cash
T t sis U n P a i e
t o p a y $50,000 a
of the other five p e r cent.
our board,
o f the
t o
n e
opner
o s
year t o t a k e c a r e
w e have discussod this i n
a f o u r j u n i o r o f f i c e r s meetings,
a n d we are
all o f one opinion, t h a t that h a d n o t ought t o b e a part
of the Federal Reserve Systcom.
w e are constantly being
spoken t o w i t h r e g a r d t o e c o n o m y a n d e r f i c i e n c y a n d a b o u t
reducing e x p e n s e s
o f the reserve banks,
W i e all recognize
that w e have built u p a great big, expensive piece o f
machinery.
T h n k
e a
a
S O O thImse A OSes i e T h e e S e r e
vice when w e c a n give free service, b u t I believe t h a t t h e
same p r u d e n c e
i n t h e F e d e r a l r e s e r v e s y s t e m s h o u l d b e exer-
cised t h a t w o u l d
be 6
ercised
i n our individual
lives---
i f
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
we Cantt-atford t o d o a thing, c a m ’ cocdts,
I want t o make this further observation, t h a t t h e
Fodi ral r e s e r v e s y s t e m h a s n e v e r h a d a
fair t r i a l u n d e r
normal,
i n just before
war,
economic conditions.
W e r v d i d not pay a
W
o came
dividend
u p t o t h e war.
the
T h e n war
s-ept a w a y a l l t h e s a f e g u
that had been
oS a r d s
built u p around conservative action.
w e g o t t o making a
&
lot o f money,
t h e s a m e k i n d o f money t h a t Governor Calkins
said that w e made here
now. I
have g o t t e n a
b
u
i.
t w e are n o t making i t
good d e a l o f e n c o u r a g e m e n t f r o m
Governor S t r o n g ' s s t a t e m e n t s ,
and I
lmow t h a t h i s a b i l i t y
}
to visualize things i s much better t h a n m y own, a n d h e
says t h a t w e a r e a p p r o a c h i n g a
dividends,
time w h e n w e c a n e a r n g o o d
b u t f r o m o u r standpoint o u t there
i n the
sticks, I
cannot s¢6-25-25 222.8 tine,
O u r banks a r e full
of money:
t h e y c m t a k e c a r e o f l o c a l conditions,
and it
does s e e m t o m e that i f w e are ever going t o reduce t h e
expenses
o f t h e Federal R e s e r v e S y s t e m t h a t n o w i s t h e t i m e
to d o it, t h a t here i s a good pdlace t o begin.
It costs theFederal Reserve S y s t e m a million dollars
to m a i n t a i n t h i s n o n - c a s h c o l l e c t i o n s y s t e m and, g e n t l e m e n ,
with a l l d u e d e f e r e n c e
t o t h e committee
a n d the very fine
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Federal Reserve Bank of St. Louis
am s p e a k i n g f o r t h e T e n t h District.
It i s unpopular w i t h o u r country banks.
T h e y feel that
we a r e t a k i n g s o m e t h i n g a w a y f r o m t h e m t h a t b e l o n g s
and w e f e e l i t w o u l d b r i n g b a c k a
the S y s t e m i f i t w e r e e l i m i n a t e d
better f e e l i n g t o w a r d
i n t h e T e n t h District.
Thess l i t t l e c o u n t r y b a n k s f e e l t h a t t h e y h a v e a
make t n e s e c o l l e c t i o n s .
I
t o them
right t o
r you will l o o k through
the
Blue Book y o u will s e e lots o f them with double spacc advertisements
o f t h e i r c o l l e c t i o n systems.
handling i t and they d o not get it.
lion d o l l a r s
f o r t h e system.
will t h a t a m o u n t t o ? A
W e can save a inil-
B u t someone will s a y what
m e i c o n dollars 2 s n o t -s01ng v o
B u t I know a
help s o much,
T h e y were used t o
distinguished gentlemen w h o
wanted t o save money, a n d h e made t h e remark that t h e way
to e c o n o m i z e
i s t o quit spending money a n d they elected
him President o f the United States w h e n h e vetoed a,
couple o f bills w d t o o k that position,
Reserve S y s t e m w o u l d t a k e t h a t p o s i t i o n I
t f the Federal
d o n o t believe
we w o u l d g e t a n y b a d r c a c t i o n f r o m t h e b a n k e r s
country b y e l i m i n a t i n g i t . I
oppose i t .
I
say that I
C f aes
a m not going t o
t would b e almost presumptuous f o r m e t o
stand u p a n d a r g u e w i t h y o u f e l l o w s b e c a u s e y o u a r e e x p e r t s
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Federal Reserve Bank of St. Louis
S17
on i t , b u t I
which I
a m speaking
f o r the
a m responsible a n d I
D a n <s--in e e
o t s trics
Tor
a m e x p r e s s i n g o u r sentiments.
I think w e a r e r e n d e r i n g m o r e f r e e s e r v i c e t h a n w e a r e
V e r e L
e 1 a rendering.
F o r instance, I
ses s o m e t h i n g d o n e a b o u t t h e p a y m e n t s
would like t e
o n o u t g o i n g curiency,
because t h a t i s something that i s abused with u s more t h a n
anything else.
E v e r y rellow who w a n t s
t o g e t $5,000 w o r t h
of new currency will a s k for $10,000 worth, a n d w e will
Givide i t a n d send hin $5,000 a n d t h e d a y after tomorrow
back w i l l c o m e t h e f i v e t h o u s a n d w i t h a
s t r a p o n it, a n d
we r a i s e t h e d e v i l w i t h h i m a b o u t i t a n d h e w i l l c h a n g e
the s t r a p a n d h o l d i t o n e d a y more.
F o r instance,
a rather b a d bank failure i n Wichita last spring, a
bank,
b u t matters
opened,
w e r e arranged
a n d t h e d a y before
a n d the bank was
i t reopened
t h e membcr
w e had
state
t o b e rebank
i n
that t o w n ordered $500,000 w o r t h o f currency, a n d w e sent
4t t o t h e bank,
a n d they d i d i t because t h e y feared w h e n
the n e w b a n k w a s o p e n e d t h a t i t c o r r e s p o n d e n t s l o c a l l y
would heed the money.
w e paid the charges o n that and
they h e l d i t t h r e e o r f o u r d a y s a n d s e n t i t back.
T h e
Federal reserve system paid the charges o n that b o t h ways.
Now, i f w e had only paid charges o n i t one w a y they would
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Federal Reserve Bank of St. Louis
218
not h a v e s e n t f o r i t ,
N o w ,
i f you a r e wondering whether
you c a n inaugurate s o m e economies t h a t will being about
a good reaction,
a r n
- ¢ that t h e member banks o f this
country w o u l d b e s a t i s r i e d
i f they could g e t currency
shipped o n e way. :
Governor H a r d i
w
o
u
l
d l i k e t o g o o n record a s
expressing m y o p i n i o n t h a t i f a n y c h a n g e s h o u l d e v e r b e
made i n our present practice o f paying transportation
charges o n currency, t h a t w e should continue t o p a y t h e
charges o n the incoming currency rather t h a n o n the outgoing currency.
Gbhrernor Bailey:
Governor Seay:
T h a t would not work with u s a t all.
I t i s the only thing which will saye
us a great “ a n y complications w h i c h I think will necesserily b e involved,
Governor Bailey: I
know what you a r e going t
that they c a n put t h e m i n the cash letters, a n d that c a n
be done, b u t I
think t h e n u m b e r t h a t w o u l d d o t h a t w o u l d
be negligible. I
want t o get through with this statement.
I haven't taken much o f your time, a n d I am going t o insist o n being recognized until I get through.
take much longer.
I t will not
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Federal Reserve Bank of St. Louis
rest
Now, I
do not want this conference t o think that I
am j u s t c o n t r a r y a n d pugnacious,
b u t w e have studied this
thine e a r s f u l i y e s i t eppistee t o c u r d i s t r i e p a m r to. t h e
System, a n d w e believe that t h e System would b e better o f f
without
t h e non-cash collection. 1
ever c o n t e m p l a t e d
with b a n k s ;
i n the original
t h a t w a s t h e original
Reserve System.
I
oO? M 0
act.
idea
b t n
A a a
" y e d o business
o f the Pederal
n this non-cash collection proposition
you d o n o t d e a l w i t h t h e b a n k b u t y o u d e a l w i t h t h e i n d i vidual.
I
t seems t o m e t h a t t h e whole t h e o r y i s repulsive
to B p reserre s y e t c u ,
Now, w i t h these f e w words which I desire t o
the record,
s o that I
and friends, I
can justify myself w i t h m y i r
want t o cs11 your attention t o t h e fact
o n record a s
that t h e A m e r i c a n Bankers! A s s o c i a t i o n w e n t
against t h e non-cash collections.
S o m e b o d y suggested t o
me t h a t t h a t w a s j u s t talk, b u t t h e y a r e mistaken, b e c a u s e
they h a d a very diligent committee, w h i c h sent o u t aues-~
tionnaires a n d g o t v e r y z o o d inrorsation.
I
how m a n y t a l k s y o u g e n t l e m e n h a v e made, b u t I
lot o f t h e m f o r t h e System,
country banks,
and I
T do n o t l m o w
have m a d e a
have a p o l o g i z e d
t o the
a n d have always g o t t h e glad hand w h e n I
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Federal Reserve Bank of St. Louis
aa
have s a i d t h a t I
was i n favor o f t a k i n g o f f t h e non-caili
collection system a n d turning i t back t o them.
Ways m e e t s w i t h a
T h e a t ale
hearty r e s p o n s e o u t i n o u r s e c t i o n o f
the country.
Governor Harding: {
want-to e x p r e s s the: o p i n i o n t h a t
if the voluntary services w e r e curtailed, t h a t t h e first
curtailment should b e made i n the non-cash collection
item.
The C h a i r m a n :
M e .
s
a
y just a
few words
bG. une history o f this thing, because i t h a s 4
with
regard
bearing
upon the attitude o f t h e members i n this room, a n d a very
strong Vom)
i
n
Seregee
functions
f
l
u
e
n
c
o n m y mind.
e
I t was-in 1920, w h e m t h e
o f + ! e s e r v e b a n k s w e r e v e r y large, t h a t n e w
w e r e assumed,
the members,
w h i c h w e r e a s s u m e d T o e peoue C o s s
“ i e undertook
The F a d e r a l R e s e r v e
WS tocdo--tiaiks.
I
t o p a y t h e c o s t s ourselves.
A c t undoubtedly specifically authorizes
t does n o t f i x t h e schedule
o f charges,
nor does i t make t h e charges mandatory, a n d the assumption
of this enormous expense o f a million dollars has been
due t o two things,
i n m y opinion.
t
h
e specific
@irection o f the Federal Reserve Board that w e should under+
take this w o r k for t h e members.
A e t -recell 2 , T e r e
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Federal Reserve Bank of St. Louis
be
adi
was n o recommendation berore t h e Federal Reserve Board that
we s h o u l d m a k e n o n - c a s h collections,
that i t b e done.
a
b u t t h e Board directed
n Esorresr 2 7 a c e
Governor Harding:
T h e action o f the Board was
based v e r y l a r g e l y u p o n r e p r e s e n t a t i o n s m a d e b y t h e D a l l a s
Bank.
The Chairman:
enced b y c o n d i t i o n s
T h e n e x t point i s that w e were influa t t h e time t o d o that a n d other things
without e e s w h i c h I personally thought w a s a mistake.
&
Now, w e have undertaken a n enormous operation i n the Bank
of Néw- Y o r k , w h i t e n 2 s o f g r e a t s e r v i c e
t o o u r members banks,
an operation which, t c a u s e o f the volume that w e handle,
we c a n d o m u c h c h e a p e r t h a n t h e b a n k s c a n d o i t themselves.
iy belief a s t o the treatment o f the non-cash collection
problem a t t h e p r o p e r t i m e w o u l d b e t o m a k e a
charge, w h i c h w i l l b e a n i n d u c e m e n t
it t h a t f i n d i t a n advantage, a
reasonable
t o those banks
t o usé
charge w h i c h n e v o r t h e l e s s
will p r o t e c t u s a g a i n s t t h i s e n o r m o u s e x p e n s e .
B u t as
o do i t a n d w e have effected
long a s v e have u n d e r t a k e n t
a readjustment o f the service t h a t i s involved,
to m e a very hard thing t o cut i t right off;
is t u r n i n g v e r y s t r o n g l y i n t h e d i r e c t i o n
i t seems
b u t m y mind
o f some d a y m a k -
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Federal Reserve Bank of St. Louis
S22
ing a Ghange which will recoup u s f o r the actual c o s t o f
eobngeedt.,
Governor Bailey:
If w e m a d e a
T h a t w o u l d v e r y largely relieve us.
charge f o r e v e r y t h i n g a b o v e $ 1 0 0 i t w o u l d r e -
lieve u s o f t h i s i n t o l e r a b l e nuisance, b e c a u s e I
think i t
*
would t a k e c a r e o f itself.
Governor Young: I
our bank favors a
veeson 1
would like t o x o o n record that
charge f o r these non-cash items.
Nave n o t b r o u g h t . i t
T h e
u p f o r d i s e u s s i o n here-lse tbe-
cause i t has b e e n pointed o u t b y some o f the eastern banks
that t h e y b e l i e v e i f a
charge i s m a d e a t t h i s t i n e i t m a y
’
e
o
a feet} s
a n n
e
i
S
result i n a number o f banks withdrawing
f r o mb t h
e system.
I think i t i s m u c h more important
a t t h e present t i m e t o
hold members i n the system than t o argue over a million
dollars w o r t h o f expense.
The Chairman:
exactly w h a t I
said
This c u e s t i o n c a m e
W h s
h a v e
T e n e “ 1 s 9G Wisse
t o the’ R e s e r v e
u p and I
e
s
B o a r d last Saturday.
said then what I
said, substantially, w i t h the addition that I
have just
do not think
the t i m e t o w i t h d r a w t h e v o l u n t a r y s e r v i c e s f o r members w a s
when b a n k e a r n i n g s w e r e a s l o w a n d i n t e r e s t r a t e s w e r e a s
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Federal Reserve Bank of St. Louis
S25
low a s they a r e now, a n d when t h e m e m e r s a r e complaining
a great deal. I
a m convinced that i f w c wait f o r a
months o n l y t h a t t h e c o n d i t i o n s a r e g o i n g t o change.
few
Gover-
nor B a i l e y s e e m s t o f e e l d i r f e r e n t l y a b o u t conditions,
but
I see a situation developing where m y best judgment i s that
are g 6 l n g
b o -be p r e i t y g o o d ,
a n a i f they are
it i s going t o cause m u c h less dissatisfaction i n
banksif w e w a i t u n t i l
i t i s n o t s o vital a
matter
t o them,
when e v e r y p e n n y o f e x p e n s e t h a t t h e y p a y i s n o t s o i m p o r t ant.
‘ t h e n t h e proper t i n e comes t h e y will j u s t h a v e t o
consider whether t h e y would rather d o i t themseives,
rather p a y o u r schedule o f charges.
or
w h e n t h e time cones
I a m going t o favor imposing a charge, Governor Bailey.
Governor Uglikins: I
think i t w o u l d b e v e r y i n f o r m i n g
if you would include i n your statement a s t o t h e origin
of the proposition, t h e reasons t h a t wereurged f o r it, t h e
reasons w h y t h e F e d e r a l r e s e r v e b a n k s s h o u l d t a k e u p o n
themselves t h e c o l l e c t i o n
o f n o n - c a s h items.
T h e princi-
pal reason that was urged, a n d I believe t h e determining
reason with t h e Federal Reserve Board, w a s that i t was
represented that many banks, because o f the requirement
that t h e y carry a l l o f their reserves w i t h t h e reserve
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Federal Reserve Bank of St. Louis
5A4
banks, h a d been obliged t o give u p their correspondents
who c o n d u c t e d s u c h s e r v i c e s f o r them,
for t h o s e banks,
t h e reserve b a n s ,
a n d i t was o n l y fair
toprovide t h e m with t
he
means o f maintaining t h e i r non-cash collections, w h i c h
they d i d n o t h a v e i n v i e w o f t h e f a c t t h a t t h e y c o u l d n o t
carry a c c o u n t s
i n t h e country.
J - t h ins - t h a t - L s
a n entire.
ground f o r u s t o s t a n d u p o n i n c o n t i n u i n g
make n o n - c a s h collections.
I
t i s not a m
much w e s p e n d s o m u c h a s i t i s a
spend i t f o r t h e b e n e f i t
ture o f a
million d o l l a r s
Governor B a i l e y : I
estion
o f how
question o f whether
o f t h e m e m b e r banks.
to
we
T h e expendi-
i s f u l l y justified.
Ber
would s u g i e s t t h a t y o u a r e i n
sympathy w i t h t h e m e m b e r b a n k s m a k i n g profits,
that you
divide their ex-cutive charges w i t h them, o r b u y their
printing machines,
o r d o s o m e t h i n g o f t h a t kind, b e c a u s e o n e
is j u s t < « u s t i f i a b l e
a s t h e other.
Governor ‘Yellborn: I
want t o back u p what Governor
Bailey has said, a n d I want t o agree w i t h Governor Calkins
when h e says that t h e reason f o r t h e Board putting o u t
that circular was because t h e member banks h a d t o keep a l l
their reserves w i t h the reserve banks a n d h a d t o give u p
their c o r r e s p o n d e n t s .
B u t I
do not think the last reason
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Federal Reserve Bank of St. Louis
525
should prevail, b e c a u s e I
know o f v e r y f e w o f the banks
that h a v e g i v e n u p t h s i r c o r r e s p o n d e n t s . I
think t h a t
it i s u n f a i r c o m p e t i t i o n w i t h c o m m e r c i s
very u n f a i r
t o t h e c o w r e r c i a l b a n k s a h a t a r e i n reserve
cities a n d branch cities t o have this business t a k e n away
from them.
Governor Harding: I
ing o f t h e C o n f e r e n c e
ite r e c o m m e n d a t i o n
charge
suggest t h a t a t t h e n e x t m e e t -
w e come here prepared
i n the matter o f making a
t o make a
reasonable
o n n o n - c a s h collections.
Governor Fancher:
G o v e r n o r Bailey h a s stressed t h e
expense o f the non-cash collections a s being a
lars.
defin-
million dol-
T h e exact figure for 1925 was $960,000, a n d for
1924,- t h e last quarter estimated--
i t will b e about
$900,000.
T h e r e i s about 955,000 saving i n the present
time o n a
larger v o l u m e
Governor Bailey:
Gvernor Fancher:
o f items.
f i o w mach larger?
T h e total number
o f items f o r
1923 was 4,205,000 a n d for 1924, 4,510,000.
T h e . cee
crease w a s $55,000, a n d that i s a compzrison o f the first
three o u . r t e r s
1g24.,
o f 1923 w i t h t h e first t h r e e quarters o n e
B u t w e must bear i n mind that y o u cannot s a v e a l l
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Federal Reserve Bank of St. Louis
526
of that anmunt i f you discontinue handling thenon~cast
collections, b e c a u s e y o u h a v e g o t t o m a i n t a i n a
department
for collecting items discounted b y the F
banks a n d s e n t a r o u n d t h e c o u n t r y f o r collection.
Y o u can
not save that much money a n d the saving would n o t b e a
large o n e .
charge 1
I
f y o u g o b a c k t o t h e o l d method o f making a
think y o u will g e s r y T e w items, because w e
tried. that;
The Chairman:
A
t t h e o u t s e t w e c h a r g e d 1 5 cents
an
item.
Governor Fancher:
Y e s , a n d w e got n o items.
The Chairman: i
i n k . t h e r e l s e r e a t difference,
Governor Fancher, ,between conditions that existed when we
made t h e charge a n d conditions w h i c h have n o w arisen, p o s sibly a s a result o f making n o charge.
T h e member banks
throughout t h e c o u n t r y a r e g r a d u a l l y l e a r n i n g t w o things.
One i s that t h e service i s a very much more eeonomical a n d
advantageous service t h a n anything that w a s possible under
the o l d system, w h e b e t h e y h a d t o m a i n t a i n r e c i p r o c a l a c -
counts, a n d all sorts o f compensation accounts around for
handling t h e business.
Governor Fancher: I
feel very strongly that w e would
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Federal Reserve Bank of St. Louis
Sel
not exceedia saving o f $500,000 b y discontinuing,
the o t h e r h a n d I
a n d or
s s i b l e dropping a w a y o f some
fear ¢
ofy our=present m e m p e r s ,
Governor Bailey:
serious t h i n g , b u t
T h a t would b e a
I egannot conceive o f i t happening.
c
Governor Fancher:
a
n
i
v
e o f i t happening,
because t h a t i s one o f the things t h a t has incuded somé o f
our s t a t e b a n k s t o b e c o m e mombers,
t h e c o l l e c t i o n Tfacilitics,
and they u s e t h e m very
Governor Bailey:
b u t not for non-
F o r c a s h items,
cash items.
F o r both,
Governor Fancher:
The Chairman:
W
e have t w o classes
o f banks
with i n c o n n e c t i o n w i t h t h e n o n - c a s h items.
t o deal
o n e i s that
class o f banks which uses t h e system a n d feels that i t i s
an advantage a n d s a v i n g t o them,
T h e othcr i s t h e class
of banks t h a t has handled these items i n the past a n d
feels t h a t they a r e losing revenue because w e are collectvy f e e l i n g h a s b e e n t h a t e x p r e s s e d
b y Governor
Harding, t h a t w e c a m o t b a s é o u r decision a s t o «hether w e
shall c h a r g e . o r n o t charge,
without m o r e a d d i t i o n a l
o r whether
data than has
w e s h a l l discontinue,
w e n
collected
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Federal Reserve Bank of St. Louis
showing t h e d3:sire o f t h e banks.
Governor Harding:
a discontinuance,
there s h o u l d b e a
(evens
t h a t there should n o t b e
b u t mercly t h e question
a s t o whether
reasonable c h a r g e ,
The Chairman:
S h o u l d w e not inquire a
little more
d:finitely i n t o t h e attitude o f the member banks w h o acwtually u s e t h e s e r v i c e ?
Governor Harding:
I t seems t o m e i f we h a d i t under
consideration for six months a n d came here prepared t o discuss it, that something definite could b e done, because
conditions t o which y o u have referred will have changed
to s o m e extent.
Governor B i g g s :
T h e r e i s o n e angle o f this that h a s
not been brought out, a n d that i s the prestige t h a t i s
given t o t h e c o l l e c t i o n b e c a u s e
o f t h e r a c t t h a t i t comes
through t h e Federal r e s e r v e b a n k .
mane o f o u r J e w s i n St. Louis,
I
n the c a s e o f a
great
t h e y believe t h a t t h e gov-
ernment o f f i c i a l s a r e a f t e r t h e m a n d t h e y w i l l p a y .
O u r
member b a n k s t e l l u s t h a t i t h a s q u i t e a n influence
in
that way.
T h e y have told us that w e g o after them a
great deal better a n d that t h e y a r e afraid o f us.
Governor C a l k i n s : d
Wisds O B P é r a . W O b l o n t o t a i s
e f
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Federal Reserve Bank of St. Louis
529
fect, t h a t t h e standing committec o n collections b e in-.
structed t o make a
study o f the operation o f the non-cash
collection system, t h e use o f that system b y the member
banks w h o use, w i t h a viow t o determining a n d recommending
whether a
charge should b e made, a n d what i t should be,
and what t h e probable effect o f i t would be.
Governor S e a y :
T h e r e i s o n e feature o f this matter
which h a s n o t b e e n r e f e r r e d t o , e x c e p t p e r h a p s i n f e r e n t i a l aber
O u r tank was opposed
cash c o l l e c t i o n f e a t u r e
t o t h e assumption o f t h e non-
a t t h e beginning.
“ f h e o n l y effec-
tive a p p e a l w h i c h t h e r e s e r v e b a n k s c a n m a k e t o t h e b a n k s
of the country t o become members i s that o f service.
I t
has b e e n s t a t e d t h a t t h e y d e s i r e t h e s e r v i c e o f c o l l e c t i n g
checks a n d c a s h items, b u t t h e y d o n o t d e s i r e t h e s e r v i c c
of collecting non-cash items.
T h a t m a y be.
B u t certain-
ly w e w e a k e n o u r p o s i t i o n i f , w h e n w e t e n d e r t h e m service,
we a r e n o t
in a
position
just a s e f f e c t i v e l y a s a
e
t o d o the whole service
and do it
correspondent b a n k c a n d o i t .
Any bank might s a y t o u s with great effectiveness a n d
force, w h a t i s the use o f m y sending checks t o you for
collection, w h e n I have other items t o send t o you that
you won't take o r for which y o u make a
charge, w h e n m y cor-
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Federal Reserve Bank of St. Louis
30
respondent will take t h e m all. I
important i t e m i n t h e m a t t e r
Governor Bailey: I
tinction b e t w e e n a
very b e g i n n i n g
think that i s a very
t o b e considered.
think thore i s a very large dis-
cash i t e m a n d a
non-cash item.
o u r bank was opposed
ness, b u t w e a r e i n i t now.
Reserve Banks,
n the
t o going into t h e busi-
T h e Board d i a advance o n e
very g o o d r e a s o n f o r t h e p e r f o r m a n c e
the F e d e r a l
I
o f these services
a n d that still remains a
by
good
reason, a d i t is the only one, I believe,that c a n be justified, a n d that i s that the Federal reserve banks are now
holding t h e reserves o f the banks o f the country a n d should
performt
h
e services w h i c h formerly were performed b y the
correspondents
o f those banks.
W i t h respect
large p r o p o r t i o n o f t h e services r e n d e r e d ,
LY G e e s
to a
very
t h a t i s perfect-
T h e only service t h e city correspondent renders
which t h e F e d e r a l r e s e r v e b a n k s
ought not t o render,
d o n o t render,
a n d perhaps
i s that o f giving t h e m advice a s t o
their investments, a n g o n purchase o f paper.
if-tne
Federal r e s e r v e s y s t e m i s n o t i n p o s i t i o n t o r e n d e r t h e
service t o the banks o f the country which the corresvondent
banks r e n d e r e d ,
disadvantage,
t h e n the reserve banks
a r e placed &
a
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Federal Reserve Bank of St. Louis
Sol
The Chairman:
T h e r e i s another p o i n t i n cennection
with t h i s n o n - c a s h c o l l e c t i o n m a t t e r
just called m y attention.
t o which iy. Harrison
U n d e r t h e terms o f our under-
standing o n this w e are n o t collecting items i n the cities
where w e have our offices, t h a t is, n o t collecting items
for t h e city banks.
T h e members i n the city w e make col-
lect their o w n items.
T h e suggestion h a s b e e n made t o u s
in New York that w e could.do t h a t service,
b y reason o f av~
oidance o f duplication o f routing a n d s o on, v e r y mech
cheaper t h a n t h e y c a n d o it, a n d t h a t t h e y w o u l d b e g l a d t o
pay T o r L t i f w e w i
d o t s
N o w ,
i f w e made a
charge
equal t o tke cost, a n d inaugurated that proposition i n
the city collection service,
w e could then possibly p u t
a charge o n items i n the non-cash cell
Governor Seay: D o ¢ é s n o t that indicate, notwithstanding the action o f the American tankers Association, t h a t
there i s a demand f o r services o f that kind?
The Chairman:
W h e r e t h e y c a n save money I
think
there is.
Governor Baile
P h e r e
g r e a t big-> “orld outside
of these central cities, gentlemen,
Governor Seay:
Outsid:
o f Kansas C i t y ?
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Federal Reserve Bank of St. Louis
332
Governor Bailey:
p
O u t s i d o f r Kansas G i t y a n d out-
New Y o r k a n d Chicago.
The Chairman:
w e have a
Go vernor F a n c h e r :
4
motion berore us, gentle-
h a v e s seconced
t h e motion.
Governor Calkins: I
would l i k e t o s p e a k t o that
motion a little further,
i n answer t o Governor Young's
sugeestion,
w h i c h was partly asked
service rendéi'ed
b y Governor S e a y .
T h e
b y t h e correspondent banks
was t h e b a l a n c e cari-ied w i t h t h e c o r r e s p o n d e n t b a n k s .
The transfer o f reserves t o the Federal Reserve banks
has l e f t a
very m u c h s m a l l e r b a s i s f o r t h e s e s e r v i c e s r e n -
dered.by c o r r e s p o n d e n t b a n k s ,
a n d t h e y a c c o r d i n g l v ren-~
der less service t o their country correspondents.
T h a t
iversal throughout t h e country districts, a n d there
are n o t o n l y some, b u t t h e r e a r é a
good m a n y c o u n t r y b a n k s
that h a v e r e d u c e d t h e n u m b e r o f c o r r e s p o n d e n t a c c o u n t s
with those banks a n d rely upon t h e Federal Reserve Banks
to p e r f o r m t h e s e r v i c e t h a t t h e c o r r e s p o n d e n t s f o r m e r l y p e r formed,
p o n the
service,
Governor Bailey:v
T h a t m a y b e true i n California,
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Federal Reserve Bank of St. Louis
Dut Tt. V s M e t e i e - in. t h e Y o n i
Governor Young:
~ D a ee re
bs ee
I o m i g h t s a y i t i s n o t truce
wWinneanolis.
The C h a i r m a n :
and I
a m eg
a
T h e r e
s
i s a
motion before
k i f anyone wants
the m o t i o n 1 s t h a t a n o t h e r study,
t h e msetin
t o v o t e o n it, a n d
i n addition t o t h e o n e
made a year ago, b e m a d e b y the collection committ
The study this time would include sov.1ething not included
before,
a n d that would b e t o get directly t h e views o f the
members w h o u s e t h e s e r v i c e
to make a
i f i t i s possible
charge a n d what t h e probably result o f a charge
for t h e s e r v i c e w o u l d b e .
extent
t o detcrmine
T h e study would inelude t h e
t o w h i c h i t w o u l d b e usea,
t h e p r o b a b l e revenue,
the attitude o f the member banks, whether o r not they
would withdraw, a n d all o f the collateral fictors t h a t w e
have d i s c u s s e d here,
T h i s report o f the
be i n t h e h a n d s o f t h e c o m m i t t e e a n d t h e y
in their investigation b y it.
T h e r e
of o p i n i o n h e r e a b o u t i t , a n d - w e c o u l d d i s c u s s
I gather t h a t w e a r e n o t r e a d y t o t a k e a
matter
o f making a
let's p a s s a
s t a i t day.
vote o n t h e
charge r i g h t n o w , a n d i f w e a r e n o t
iS
motion a n d g e t o n t o s o m e t h
ing else.
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Federal Reserve Bank of St. Louis
(There were calls f o r t h e cuestion,.)
im. “ooraner:
wish
I r I may interrupt for a moment, I
t o say that when t h e Committce
o n Voluntary Services
made i t s survey they sent to, o r caused t o b e brought t o
the attention of, 9 1 7 representative banks a: iuestionnaire.
Governor Fancher:
T h a t was a
selectsd:list o f banks,
Lt not?
Mr. S t r a t e r :
Y e s .
I
t was voted
was f i r s t p r o p o s e d n o t t o s e n d a
but t h a t a
représentative
b y the Conference
questionnaire,
o r each Federal reserve
bank
visit t h e m e m b e r banks.
Governor Fancher: I
remember t h a t w a s a
selected
Mr. Strater:
selected list o f banks.
list.
idea b a c k
would o n l y
quested,
Y e s , a
o f that seemed
The
t o b e that t h e auestionnaire
b e reaching those banks whose opinion was r e -
a n d t h e only w a y w e could g e t f h e information
that G o v e r n o r Uglkins w o u l d l i k e t o h a v e w o u l d b e t o s e n d
a cuestionnaire t o svei b a n k using t h c non-cash collec-~
Elon Servace,
The Chairman:
should - d o t h a t ?
H a s n ' t t h e time arrived n o w when w e
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Federal Reserve Bank of St. Louis
YS,
Of c o u r s e t h e c o m m i t t e e c o u l d v e r y
easily d o i t , b u t I
t6 t h e a t t e n t i o n
wanted’
t o bring that objection
o f t h e Conference.
Governor Harding: I
d o not know h o w the other
banks a r e situated, b u t w e c z Y
district
to it
Sa521%- fine. out 1a-Oue
b y personal c o n t a c t ,
representative m a k i n g f r e q u e n t v i s i t s a r o u n d t o t h e banks.
The Chairman:
w o u l d y o u b e willing t o
to t h e d i s c r e t i o n o f t h e c o m m i t t e e ?
Governor Caliins: I
would b e perfect
leave i t t o t h e committees. I
would s u g g e s t t h a t i n f o r -
mation b e o b t a i n e d t h r o u g h t h e t w e l v e b a n k s a n d t h a t e a c h
bank a d o p t i t s o w n m e t h o d o f g e t t i n g t h e information.
Governor Fancher:
I
t w o u l d b
e your s u g z e s t i o n t h a t
deal w i t h t h e t w e l v e b a n k s a n d t h a t e a c h b a n k d e t e r how i t s h a l l o b t a i n t h e i n f o r m a t i o n ?
Governor Harding:
(The m o t i o n ,
The Chairnans:
Y e s ,
h a v i n g b e e n d u l y seconded,
w a s carried.)
T h e n e x t q u e s t i o n berore t h e confer-
ence i s t h e a p p r o v a l
o f t h e r e p o r t o f t h e committes,
with
the various e x c e p t i o n s w h i c h h a v e a l r e a d y b e e n a c t e d upon.
Governor F a n c h e r :
d
P MOALO I b 8
E S y
o f <Ghis
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Federal Reserve Bank of St. Louis
Conference t h a t t h e report o f the commi
anproved,
Governor Bailey: I
second t h e motion.
been d u l y seconded,
The Chairman:
w a s carried.)
N o w w e have one other westion having
to d o with collections, Topic 2-(g), suggested b y
Francisco,
bankts w a r r a n t y t h a t
i t
authority o f c u s t o m e r t o a c c e p t
DrOVLELOns 0 b R e m i a t r o n F f
rding r e s p o n s i b i l i t y o f items,
It i s recomzended:
T h a t t h e Standing C o m m i t t e e o n
instructed
t o prepare a
uniform circular
contract bvetween b a n k s a n d t h e i r d e r and clearing-member
banks
amend their contracts (contained o n deposit slips a n d
signature c a r d s )
i n accordance
w i t h t h e form proposed
the circular:
That t h e F e d e r a l
amend t h e i r c h e c k c o l l e c t i o n c i r c u l a r
o n March 1 ,
to provide t h a t t h e act o f submitting checks t o Federa
Reserve Banks for collection will b e construed a s
ranty that t h e depositor h a s lodged w i t h t h e
t o
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Federal Reserve Bank of St. Louis
bank t h e r e q u i r e d a g r e e m e n t s ,
Governor C a l k i I
it i s a
will s a y i n t h e b e g i n n i n g
contertious q u e s t i o n a n d a
We have. attem
agreement
somewhat d i f f i c u l t o n e .
v a r i o u s ways t o get some sort o f an
o r regulation
o r contract
t o ensure o r assure
us that t h e banks sending i t e s t o u s had authority f r o m
the d e t
t o v r o f those i t e m s t o make c o l l e c t i o n t h r o u g h
the means b y which w e make collections. I
that has b e e n accomplished, a n d 1
be accomplished.
do not @ l i e v e
a m not sure that
T h e sugxestion h e r e i s that t h e Federal
serve b a n k s a m e n d t h e i r c h e c k c o l l e c t i o n c i r c u l a r s
provide t h a t t h e a c t o f s u b m i t t i n g c h o c k s
reserve
b a n k f o r collection will
to
t o t h e Federal
b e considered
a s a
“ar-
ranty that t h e depositor h a s lodged w i t h t h e depositing
bank t h e required agreement.
The Chairman:
G o v e r n o r Calkins,
2:
it i s d e s i r a b l e
t o have a
moeting o f t h e
the Reserve Board within t h e next t e n minutes, a n d then
have a joint session . gf: the conference this afternoon,
being p r e p a r e d
t o f i n i s h u p o u r p r o g r a m tomorrow, w h i c h
we c a n c a s i l y d o .
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Federal Reserve Bank of St. Louis
338
Governor Calkins:
question a n d I
t0<ace-on-1t
M r . Chairman, t h i s i s : a legal
d o n o t k n o w whether t h i s Conference wants
o r ‘nob, I
think i t i s a n important c u e s t i o n
and o n e t h a t w i l l h a v e t o b e d e a l t w i t h s o o n e r o r later.
The conclusion o f our counsel is,and I have always b e e n o f
the opinion, t h a t t h e ovner o f the check i s bound b y the
derinite a g r e e m e n t s c t f o r t h i n R e g u l a t i o n J , e v e n t h o u g h
such a n agreement i s m a d e o n l y betrvreen ourselves a n d t h e
last endorsing bank, u p o n t h e theory that t h e last endorsing b a n k i s a
sub-agent
authorized, i m p l i e d l y ,
o f t h e owner a n d i s therefore
b y t h e owner t o make a n y agreement
necessary a n d r e a s o n a b l e
of the item.
I
i n connection w i t h t h e collection
f that i s t h e correct opinion,
w e would
be justified i n making our circulars t o include the provision that t h e :
f
F submitting checks t o a Federal
reservebank b e c o n s t r u e d
as a
warranty t h a t t h e b a n k h a d
authority f r o m the depositor.
The Chairman:
~ * pile y o u were o u t o f the room,
Governor Calkins, a m t h e r p h a s e o f this matter w a s discussed, a n d Governor Fancher agreed that i n his district,
as
in ourg, t h e r e i s a very restless feeling developing among
.
gome o f t h e b a n k s t h a t t h e e f f o r t s b e i n g m a d e i n o u r c i r c u l -
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Federal Reserve Bank of St. Louis
539
ars t o r e l i e v e o u r s e l v e s
negligence.
T h e second proposal
the guapintee,
per b a n k a g r e e s
cane
o f liabilities g r o w i n g o u t o f
i n t h a t topic, c o n t a i n i n g
i f y o u please, t h a t t h e c u s t o m e r
t o d o s o a n d so, I
i n our district
and I
o f t h e mem-
think w o u l d j u s t r a i s e
d o not believe
t h e member banks
would l i k e i t a t all.
Governor,
C a iie
A
s y o u doubtless k n o w there a r e
two d i f f e r e n t k i n d s o f proposals
in s o m e c a s e s adopted.
n o w b e i n g discussed,
O n e o f t h e m applies
t o what i s
known a s t h e M a s s a c h u s e t t s r u l e a n d t h e o t h e r a p p l i e s
what i s k n o w n a s t h e N e w Y o r k rule,
we a r e liable,
n o t f o r negligence
to
a n d t h e efrect i s that
i n t h i s case, b u t l i a b l e
se o f the negligence o f the endorsing bank.
we c a n c o r r e c t t h a t s i t u a t i o n o r g
The Chairman:
and
f
S u p p o s e t h e customer
Wether
o sue;
o f t h e member
bank i s n o t b o u n d b y t h e t e r m s o f t h e c o n t r a c t b e t w e e n t h e
Federal r e s e r v e b a n k a r d t h e m e m b e r b a n k .
O
n that suppo-
sition y o u hold that t h e liabilities, w h i c h otherwise w e
should recover ‘ r o m our member banks,
w e would b e unable
to recover because o f the failure o n the part o f the member
bank t o b i n d i t s customer.
Governor C a l k i n s :
Because
o r the fact that t h e en-
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Federal Reserve Bank of St. Louis
340
dorser might have a good claim against u s which w e cannot
look t o t h e m e m b e r b a n k t o p r o t e c t u s o n .
The Chairman:
I s n ' t that a
condition t h a t h a s existed
for y e a r s b e t w e c n b a n k s ?
Governor Calkins:
Doubtless.
arose b e c a u s e o f t h e d e c i s i o n
T h e question really
i n t h e M a l l o y case,
o f which
you may have heard, a n d the various clearing houses about
the c o u n t r y a r e a d o p t i n g r u l e s a n d regulations, p r i n t e d
in
pass books a n d o n deposit slips, f o r t h e purpose o f protecting themselves,
The Chairman:
V o u l d n o t this b e a
proper t h i n g t o
refer t o this meeting o f counsel?
Governor Norris: I
The Chairman:
should think eminently s o ,
‘ o u l d y o u like t o have that course
pursued, Governor Calkins?
Governor Calkins:
The Chairman:
I s your counsel going t o b e present?
Governor Callinss:
The Chairrans
Y @ s .
Y e s ,
Y o u could instruct h i m t e present it,
or advise him that the matter i s likely t o come u p and see
that h e i s p o s t e d
o n t h e wishes
Governor Harding:
o f t h e conference.
T h e n I move that this m e s t i o n
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Federal Reserve Bank of St. Louis
541
be referred t o the meeting o f counsel under t h e terms o f
tHe “previous rPesoliutron.
Governor Young! I
second the motion.
arernty McKinney: I
going t o b e r e f e r r e d
banks,
think i f all these matters a r e
t o counsel
o f the various reserve
t h e counsel o u g h t t o b e advised sufficiently
advance, before leaving home,
in
i n order t o make some pre-
paration t o d i s c u s s t h e subject.
Governor Calkins: I
diately a d v i s e c o u n s e l
suggest t h a t t h e S e c r e t a r y i m m e -
o f those b a n k s w h o a r e g o i n g t o a t e
tend,
Governor Mclhinneys y Y O u l d i t b e p o s s i b l e
letter
t o send a
t o t h e Federal Reserve B o a r d o n these special topics
and send a copy t o t h e Governors,
s o that t h e y will a l l
be informed?
The Chairman:
T h e motions
i that this topic b e also
referred t o t h e meeting o f counsel, a n d that motion was
seconded.
(The motion having b e e n duly seconded, w a s carried.)
The Chairman:
I t will b e necessary t o adjourn n o w
Uuntrl +hhie- arterncon.
Wistit. ohne. Board. ov. c<b-0
w
e will g o i n t o j o i n t confeence
M e Loezeops. Mls
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Federal Reserve Bank of St. Louis
542
(Whereupon,
o h motion,
d u l y seconded,
t h e conference
SdjOUrhGd 26.11 d'elock a , tw, Until 221156 ofeloek: Dp, wm,
of t h e s a m e d a y f o r t h e p u r p o s e
o f going i n t o joint ses-
sion with t h e Federal Reserve Board, a n d until 9
o'clock
a. m., Thursday, November 13, a t which time t h e separate
Conference
o f Governors w o u l d r e c o n v e n e . )
eo
o
e
P r o ie
Thursday, N o v e m b e r 1 3 , 1924.
The Conference o f Governors reassembled, pursuant t o
adjournment,
a t 9 o'clock a . m.
Appearances
a s p r e v i o u s l y noted.
The Chairman:
T h e conference will come t o order.
We a r e d o w n t o T o p i c 3-(e).
3-(e) Registered mail insurance o n Federal
Peserve notes.
Consideration b y Governors o f whether
it would b e advisable t o a s k the
Treasury t o let Federal reserve banks
place their o w n insurance.
This matter has been investigated b y Mr. Kenzal, o f
New York, a n d t h e situation, I
understand,
i s this:
Effective J u n e 1 , 1924, t h e T r e a s u r y D e p a r t m e n t p u t i n t o
force a
new policy o f insurance o n registered mail ship-
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Federal Reserve Bank of St. Louis
345
ments w h i c h w a s i s s u e d b y a
group o f u n d e r w r i t e r s
sponse t o i n v i t a t i o n s f o r bids. I
surod under that policy.
think w e a r e a l l i n -
T h e Treasury claims t h a t t h e
rate o n the n e w policy efrects a
saving o n all shipments
for all parties o f substantially $80,000 a year.
veloped, h o w e v e r ,
i n re-
I t de-
t h a t t h e n e w policy, i n s t e a d o f p r o v i d i n g
a scheme o f rates which reflected i n some measure t h e
degree o f risk, t h a t i s t o s a y t h e length o f territory t o
be covered b y the shipments a n d s o on, p u t i n a flat rate
of 4-7/8 cents, and it doesn't make any difference now
whether t h e n o t e s a r e s h i p p e d f r o m R i c h m o n d
or f r o m S a n F r a n c i s c o
in b o t h cases.
t o Washington.
t o Washington
T h e rate i s the same
T h e e f f e c t u p o n t h e FPederal R e s e r v e B a n k
of N e w Y o r k w a s t o d r o g a t e a
special r a t e o f 2 - 1 / 2 c e n t s
which w e had o n cancelled material, l i k e coupons, a n d put
that rate u p to 4-7/8 cents.
T h e other effect was t o
reduce the rate o n other shipments from 5 cents t o 4-7/8
cents.
T h e n e t result was a n incrsase o f $8,000 a
year
for us,
It developed i n the course o f investigation that o n e
half o f a l l p r e m i u m s a r e p a i d b y t h e F e d e r a l r e s e r v e b a n k s
own
for their account a n d one-third p a i d b y others, s u c h a s
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Federal Reserve Bank of St. Louis
344
national banks a n d others insured under t h e policy, a n d
only o n e - s i x t h
o f t h e p r e m i u m s a r e p a i d b y t h e Treasury.
The r e s u l t o f t h e r e a d j u s t m e n t
a saving o f $80,000,
o f t h e policy i s t o effect
i f the estimate i s correct, a b o u t o n e
half o f that amount being f o r t h e Federal reserve banks,
but t h e e n t i r e s a v i n g , a p p a r e n t l y ,
i s t o t h e benefit o f
those t a n k s w h i c h h a v e t h e l o n g e s t s h i p m e n t s
which g e t t h e b e n e f i t
o f t h e r e d u c e d rate,
t o make a n d
a n d those near-
by tanks which formerly h a d t h e benefit o f a iow rate o n
account
o f less r i s k a r e r e a l l y n o t a f f e c t e d h a l f a s much,
. We w e r e s u c c e s s f u l
produce a
i n persuading t h e underwriters
to
n e w p o l i c y a n d c u t t h e r a t e o n cancelled s t u f f
down to 2-1/2 cents again, s o that the excess cost t o the
New Y o r k B a n k , a n d I
suppose t o t h o s e w h o a r e p a r t i c i p a t -
ing, h a s b e e n somewhat reduced, b u t w e urge u p o n the
Treasury that steps b e taken t o secure a
policy which would
give everybody t h e benefit o f t h e 2-1/2 cent rate, a n d then
that
risk.
w e get a
policy w h i c h w o u l d
be a
fairer m e a s u r e
T h e r e i s much more r i s k involved
in a
o r
shipment
from S a n Francisco t o Washington t h a n there i s ‘ i n a shipment f r o m Richmond t o Washington, obviously, a n d ir,
‘ginston has recently said t o m e that t h e investigations
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Federal Reserve Bank of St. Louis
545
which w e r e c o n d u c t e d
t o find o u t whether s o m e better pol-
ley c o u l d m o t b e a r r a n g e d t h a n t h i s o m ,
stirring u p t h e u n d e r w r i t e r s
h a d resulted
in
s o that w e have h a d great
difficulty i n getting a s good a rate a s this, a n d suggested t h a t w e w a i t u n t i l s o m e t i m e n e x t y e a r t o t a k e i t u p
again,
a n d t h a t then,
i n cooperation w i t h t h e reserve b a n k s
they would e m e a v o r t o get a
more e q u i t a b l e a d j u s t m e n t
new basis which will effect 9
o f premiums. I
haven't a n y -
thing t o recommend b e y o n d t h e s u g g e s t i o n t h a t w h a t h e
has p r o p o s e d s t r i k e s
to d o now. I
m e a s being t h e o n l y feasible t h i n g
a m satisfied t h a t w e cannot g e t a better
policy u n d e r p r e s e n t c o n d i t i o n s f r o m a
b i g g r o u p o f under-
writers, which i s the way that these policies are written.
Are t h e r e a n y suggestions?
Governor Fancher:
‘ I m i g h t s a y , M r . Chairman,
that
this new policy with the rate of 4-7/8 cents has been a
little a d v a n t a g e
t o us.
O u r rate formerly w a s s i x cents
and w e are somewhat benefited,
B u t the officer having
charge o f insurance matters h a d a talk with a representative o f Delanoy &
Delanoy w h o really lost this business,
and o f course a r e vory anxious t o g e t some part o f i t back,
and that representative s a i d that i f h e could g e t t h e
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Federal Reserve Bank of St. Louis
S46
business o f four o r five o f the large banks t h e y weuld
be i n a position t o quote a
very attractive rate, m u c h
more s o t h a n t h e r a t e w e a r e n o w enjoying.
The Chairman: I
can i m p r o v e
think i f t h e y a r e g i v e n a
o n this policy.
Governor Fancher:
Lt
chance t h e y
Y e s , a n d h e i s v e r y Keon t o get
D i d I understand f r o m your statement, “ r . Chairman,
that y o u were getting a
rate o f 2-1/2 cents o n cancelled
material?
The Chairman:
Governor f a n c u c r : I s t h a t a
special r a t e t h a t y o u
have w o r k e d o u t f o r y o u r b a n k ?
The Chairman: T
a m not able t o say.
Mr. Harrison: I
think i t applies g e n e r a l l y .
Governor Seay:
W w e have b e e n informed recently t h a t
it applies g e n e r a l l y .
Governor Fancher:
Y o u think a l l o f the banks a r e get-
ting a rate of 2-1/2 cents?
Governor Seay:
Yes.
The Chairman:
I
t i s r e s t o r e d u n d e r t h a t policy,
that t h e y a r e a l l e n j o y i n g
Governor Fancher: I
i t now.
was n o t q u i t e c l e a r o n that.
s o
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Federal Reserve Bank of St. Louis
347
Governor iicDougal:
A s I understand it, t h e present
plan i s not equitable, b u t has resulted i n imposing a n
extra charge.
Governor Fancher:
I t has resulted o o k saving t o
it does n o t affect Chicago materially, a n d i t
must have a
material benefit f o r t h e western banks, n o t -
ably the San "rancisco Bank.
T h a t i s what you would like
to. adjusc,.laenitit?
The Chairman:
Y e s .
I
t seems t o m e that i n a n
equitable arrangement y o u must take into consideration
that there i s a greater r i s k i n a long shipment t h a n i n
a short shipment.
T h a t its o n e o f t h e e l e m e n t s
i n rate
making, a n d all o f these insurance rates a r e based upon
this
time i n transit.
on Insurance,
W e want to take up with our committee
w e l l b e f o r e t h e e x p i r a t i o n o f t h e year,
and
ask that committee t o make u p a schedule o f rates a n d do
whatever w e c a n b y negotiation.
Governor McDougal: I
move that that b e done, Mp.
Chairman.
Governor Calkins: I
second that.
(The motion, having been duly seconded, w a s carried.)
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Federal Reserve Bank of St. Louis
The Chairman:
T h e next topic i s 4-(a)-3.
7
Report
o f committee
LYaGLom
o n Standard-
O n S u p o Les,
report i s a s follows:
following i s a summary o f the work o f the Committes
o n Standardization and=Purchase
Lts r e p o r t to- w h e Governors’
As i n d i c a t e d
to c a c h F e d e r a l
C o n f e r e n c e of: April, i 9 2 4 :
i n that. r e p o r t
reserve
o f Supplies s i n c e
bank a
t h e Committee forwarded
questionnaire
o n certain
standard supplies o n which i t was hoped exonomies could
berefretted.
replies
B
y the e n d o f M a y the Committee h a d received
a n d t h e tabulation a n d anal-
t o t h e questionnaires,
ysis t h e r e o f f o r m e d t h e b a s i s f o r a
tee M e r d e
m e s
T h e reolies
meeting o f t h e C o m m i t -
t o these questionnaires
disclosed t h e f a c t t h a t t h e F e d e r a l r e s e r v e b a n k s w e r e
paying w i d e l y v a r y i n g p r i c e s f o r t h e s a m e o r s u b s t a n t i a l l y
the same supolies.
was a d d r e s s e d
A
s a result o f this meeting a letter
t o t h e Governor
under d a t e o f August 1 5 , 1 9 2 4 ,
taining r e c o m m e n d a t i o n s
o f each Federal reserve b a n k
a s p e r c o p y attached, c o n ~
a n d sug.¢eéstions
procedure a n d useé a n d a p p l i c a t i o n
Accompanying t h e l e t t e r w a s a
o n purchasing
o f c e r t a i n supplies.
complete t a b u l a t i o n
o f the
replies t o the cuestionnaires, t h u s enabling e a c h bank t o
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Federal Reserve Bank of St. Louis
549
to judge whether o r not its aualities a n d prices a r e i n
line w i t h t h o s e p a i d b y t h e o t h e r banks.
It i s practically impossible t o s e t o u t i n dollars
and cents t h e value o f the service which has already b e e n
rendered
b y t h e Q o m m i t t e e a n d t h e a m o u n t o f savings w h i c h
may hersarter result therefrom,
however,
T h e Committee i s contident,
t h a t a l l Pederal reserve banks have benefited
directly o r indirectly through consideration o f the wide
variance
i n prices p a i d a n d t h e c o n s e q u e n t c l o s e r s c r u t i n y
of purchases,
Several
o f the banks h a v e
m t reported
directly o r formally, b u t the members o f this Committee
have o b s e r v e d c o n s i d e r a b l e c o r r e s p o n d e n c e t e t w e e n t h e pur-
chasing agents o f the banks, a n d t h e Secretary o f the
Gommittee h a s f u r n i s h e d i n f o r m a t i o n
to sources o f supply.
t o inaouiring b a n k s a s
A t least o n e o f the banks has ad-
vised that its purchasing procedure has been revised as
a result
o f t h e Committeets
reports
a n d suggestions;
that they a r e n o w using a more economical currency strap,
have lowered thegrade o f paper i n other forms a n d have
instructed t h e i r p u r c h a s i n g a g e n t t o c o r r e s p o n d w i t h o t h e r
Federal r e s e r v e b a n k s
omies.
i n a n effort t o effect further econ-
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Federal Reserve Bank of St. Louis
350
The C o m n i t t e e
a l r e a d y arranged blanket contracts
with c e r t a i n m a n u f a c t u r e r s c o v e r i n g t h e p u r c h a s e
seals, rubber banks a n d g o m clips,
ers h a v e a g r e e d
aye
speciric
t o sell
i n which t h e manufacturreserve
bank
o f branch
p r i c e m u c h 1 é s s t h a n m o s t of- t h e prices
previously o b t a i n e d ,
course,
a n y Federal
o f lead
A n y Federal
reserve
bank
i s
,of
a t liberty t o take idvantage o f the contracts a n d
obtain t h e q u o t e d p r i c e s .
edly b e i n a
the p u r c h a s e
A
s time goes
o n w e will undoubt-
position t o a r r a n g e o t h e r c o n t r a c t s c o v e r i n g
o f other supplies,
t h e advantages
may b e a v a i l e d o f b y t h e r e s - r v e banks.
o f which
T h e Committee
considers t h a t i t s e f f o r t s t o w a r d s t a n d a r d i z a t i o n
plies w i l l b e t h e m e a n s o f e f f e c t i n g c c o n o m i e s
impostance
a s t h e joint purchase
o f sup-
of
o f supplies, s i n c e i t
has b e e n f o u n d t h a t s o m e o f t h e P e c e r a l r e s e r v e b a n k s h a v e
been p u r c h a s i n g a r t i c l e s
o f higher o u a l i t y t h a n n e c e s s a r y
to p r o p e r l y f u l f i l t h e i r requirements,
The following recormmendations a n d suggestions made
by the Committee i n its letter o f August 1 3 t h t o the *ederal
reserve banks,
a r e reiterated
a t this t i m e f o r t h e purpose
of emphasis, because i t i s believed efficiency a n d economy
will r e s u l t f r o m t h e i r adoption:
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Federal Reserve Bank of St. Louis
Sol
1- T h a t t h e p u r c h a s i n g agent, b e f o r e p i a c i n g orders,
report
t o t h e proper o f f i c e r a n y i n s t a n c e s w h e r e h i s
prices a r e c o n s i d e r a b l y a b o v e t h e l o w e s t p r i c e p a i d f o r a
similar s u p p l y
b y another Feceral
reserve bank.
e- That t h e purchasing agent report t o the same officer
caces where overating departments refuse t o use less
expensive materials suggested b y the Committee o r those
in use i n other Federal reserve banks.
5- That t h e purchasing agents b e encouraged t o corres-~
pond w i t h o n e a n o t h e r a n d e x c h a n g e i d e a s
prices
o f a n y articles
o n aualities a n d
o r materials w h i c h t h e y m a y have
occasion t o buy.
4- T h a t a l l b r a n c h p u r c h a s e s
with t h e e x c e p t i o n
o f principal supplies,
o f - m e r g c n c y purchases,
b e made b y o r
approved b y the head ‘office u p o n requisition f r o m t h e
branch,
Respectfully submitted,
Committee
o n Standardization a n d Purchase
o f Supplies
Worthington, C h a i r m a n
hauckner, Secretary
Didtard;
Hea e n i S
Huston
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Federal Reserve Bank of St. Louis
AU SUS
Mir.
-
G S .
y LONGPHOS.
Pedceral H e s e r v e B a n k o f
Dear Governor:
Under date o f arch 2 5 , 1924, t h e Committee o n Stan-~
dardization a n d P u r c h a s e
the G o v e r n o r
o f Supplies a d d r e s s e d a
o f each bank relative
letter
to
t o t h e w o r k a n d pur-=
POSeCS O T tite C j w m i t t e s a n d s e n t w i t h t h a t l e t t e r s c h e d u l e s
listing certain supplies a n d asking f o r information regarding them.
T h e s e -sehedutes o r q u e s t i o n n a i r e s h a v e
been r e c e i v e d f r o m a l l t h e banks a n d h a v e b e e n c o n s i d e r e d
at a recent mebéting o f the Committee.
Due c o n s i d e r a t i o n w a s g i v e n t o e a c h o f t h e s u p p l i e s
covered
price
case
i n t h e westionnairse,
a n d adaptation
o f most
b o t h rrom t h e standpoint
t o t h e work,
o f t h e supplies
i
t was noted
t h a t t h e prices
of
i n the
paid and the
s
qualities u s e d varied considerably.
The C o m m i t t e e a s s u m e d t h a t l r e i g h t a n d e x p r e s s c h a r g e s
were included"in t h e prices quoted. Therefore, t h e fact
that o n e b a n k p a y s s l i g h t l y m o r e t h a n another b a n k f o r t h e
same article does n o t necessarily i m p l y that t h e latter
is b u y i n g a t a
lower b a s i c p r i c e a s t h e d i f f e r e n c e
rice m a y k e caused b y the freight,
i n
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Federal Reserve Bank of St. Louis
353
There i s being forwarded t o y o u under separate cover
a tabulation o f the replies t o t h e questionnaires w h i c h
we h o p e w i l l b e o f c o n s i d e r a b l e a i d t o y o u r b a n k i n m a k i n g
future purchases.
W e believe t h a t b y using t h e question-
naire i n the following manner, economies w i l l result:
i <- B y a
careful s t u d y o f t h e s t o c k o F m a t e r i a l - u s e d
for e a c h supply,
on a
i t may b e possible f o r y e u t o standardize
cheaper g r a d e o f material w h i c h w i l l b e s u f f i c i e n t
to a n s w e r t h e p u r p o s e f o r w h i c h t h e a r t i c l e i s intended,
2supplies
By 4
careful s t u d y o f t h e prices p a i d f o r s i m i l a r
b y the other Federal reserve banks
a n d branchos,
you c a n determine whether o r not y o u are buying a t a fair
jongabtowe
5 - B y insisting that your Purchasing Agent, before
placing future orders, report t o the proper officer a n y
instance where his price i s considerably above t h e lowest
price p a i d f o r a similar supply b y another Federal reserve
bank.
T h e P u r c h a s i n g A g e n t s h o u l d a l s o r e p o r t to. t h a t
officer c a s e s “ h e r e o p e r a t i n g d e p a r t m e n t s r e f u s e t o u s e
less expensive materials su.gested b y the C o m i t t e e , . r
o
those
i n use
i n other Federal
The C o m m i t t e e b e l i e v e s
Reserve Banks.
that
i t c a n b e o f considerable
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Federal Reserve Bank of St. Louis
354
bencrit
t o t h e banks
b y acting a s a
c l e a r i n g h o u s e f o r in-~
formation n o t o n l y o n t h e s u p p l i e s c o n s i d e r e d
tionnaire b u t a l s o o n a n y o t h e r supplies.
i n the ques-
I t hopes t h a t
the banks, p a r t i c u l a r l y t h e P u r c h a s i n g Agents, w i l l a d o p t
this m e a n s o f e z c h a n g i n g i n f o r m a t i o n
o f benefit
t o all
coneerned,
Tt i s almost impossible, e x c o p t b y elaborate d-tail,
to c o v e r t h e f u l l specisvication f o r e a c h s u p p l y l i s t e d
the t a b u l a t i o n o f t h e m e s t i o n n a i r e s .
in
T h e Secretary o f
the Committee will b e glad t o furnish a n y bank with specifications
supplies
o n a n y o f t h e supplies l i s t e d a n d o n a n y o t h e r
o n which specifications
m a y b e desired,
sugeested t h a t t h e P u r c h a s i n g a g e n t s
b e encouraged
I
t is
t o cor-
respond w i t h one a m t h e r a n d exchange ideas o n qualities
and prices o f any articles o r materials w h i c h they m a y have
occasion t o buy. T h r o u g h t h e exchange o f such information
it i s h o p e c t h a t t h e b a n k s w i l l c o m e t o u s e t h e l e a s t e x -
pensive fabrics a n d materials t h a t will satisfactorily
Serve. t i e p u r p o s e -.o6r w h i c h t h e s u p p l i e s a r e intended.
For t h e t i m e being, h o w e v e r ,
have r e f e r r e d
t h e Committee w o u l d l i k e t o
t o i t those inouiries w h i c h have t o d o w i t h
the a r t i c l e s c o v e r e d . i n t h e q u e s t i o n n a i r e
i n order t h a t
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Federal Reserve Bank of St. Louis
555
it c a n b e kept fully informed o n all matters. pertaining
to t h e s e s u p p l i e s a n d t h u s b e i n a
information
position t o f u r n i s h
t o i n o u i r i n g banks.
The Committ:-e n o t i c e d p a r t i c u l a r l y
i n going over t h e
questionnaires t h a t t h e branches a r e paying i n the majority o f cases, c o n s i d e r a b l y h i g h e r p r i c e s f o r s u p p l i e s t h a n
the head offices,
T h e Committee recomiends t h a t a l l
the branch purchases o f principal supplies, w i t h the exception o f emergency purchases,
b e made b y o r approved b y the
head office u p o n requisition f r o m t h e branch.
Below a r e s u g estions a n d r e c o m e n d a t i o n s
i n respect
to each o f the supplies listed o n the Comvaittee's cuestionmares
Money Straps.
‘
The tabulation o f the questionnaires, together w i t h
the (ommittee's study, discloses t h e fact that a 50 Ib.
kraft s t r a p i s t h e m o s t e c o n o m i c a l s t r a p t o u s e a n d t h a t
it i s e n t i r e l y s a t i s f a c t o r y f o r t h e purposc.
T h e tank
that i s buying currency straps most economically i s using
the following:
Straps f o r f i t currency:
A 5 0 lb. N i b r o c k r a f t ( o r equal) u n c o l o r e d
i s delivered
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Federal Reserve Bank of St. Louis
556
in u n g u m m e d s h e e t s
12
standard s i z e s h e e t 2 4 ;
s t r a p s a r e cut down t o the
G-1-1/2 o n a money cutting machine. C o l o r e d
is n o t u s e d t o d i s t i n g u i s h t h e denominations;
accomplished
b y distinctive d G sig
are~-printed-<in b l a c k ink.
the p i n s r e c e i v e d
4 1 1 straps
P i n s a r e u s e d r a t h e r t h a n glue;
o n incoming shipments a r e salvaged f o r
this purpose (see ®xhibit “Aa” enclosed with tabulation o f
questionnaires).
Straps f o r u n f i t currency:
A 50 1b. Nibroc kraft (
delivered
i n ungunmed s h e e t s
or equal) uncolored stock i s
12 x
18 (cutting exactly o u t
of a standard size sheet 2 4 x 36). S t r a p s a r e e u t down
to t h e s i v e c2.2) x
1-1/2 o n a
money c u t t i n g machine.
are p r i n t e d w i t h t h e p r o p e r c o l o r e d i n k a s r e q u i r e d
the T r e a s u r y Department.
by a brush.
Straps
by
G l u e i s applied t o t h e straps
(See
above
The Committee believes that the plan outlined/for
buying,
printing,
a n d using money straps will
b e found
t o
be t h e m o s t e c o n o w i c a l a n d i t i s r e c o m e n d e d t h e r e f o r e
that a l l F e d e r a l r e s e r v e b a n k s
a n d branches
use a
kraft
money strap a n d that a variance i n design o f printing b e
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Federal Reserve Bank of St. Louis
used t o d i s t i n g u i s h b e t w e e n v a r i o u s a m o u n t s
rency,
and a
divference
of
i n t h e color o f printing b e used
to d i s t i n g u i s h b e t w e e n t h e v a r i o u s k i n d s
o f u n f i t o r muti-
lated currency, w h i c h i s t o b e cut a n d sent t o Washington
for r e d e m p t i o n
i n accordance
Treasury Department.
w i t h t h e requirements
W i t h reference
o f the
t o straps f o r unfit
currency, i t is likely that some Federal reserve banks will
prefer t o u s e a
full g u m m e d s t r a p i n s t e a d o f a p p l y i n g g l u e
with a brush t o anungurmed strap;
i n which case i t i s
recomended t h a t t h e same s t o c k o f paper b e used b u t t h a t
it b e gummed instead o f ungummed.
T h e Committee suggests
that t h e branches might u s e t h e same straps a s are used
by the head offices a n d identify t h e m b y including t h e
name o f the branch i n a rubber stamp used b y the money count-
ers for -initialing the money handled b y them.
T h i s would
obviate t h e mecessity f o r printing individual straps f o r
the h e a d o f f i c e a n d e a c h branch.
Coin a n d C u r r e n c y B a g s .
Apparently t h e e x p e r i e n c e t h r o u g h o u t t h e s y s t e m w i t h
this supply has h o t been t h e same a s the fabrics u s e d vary
considerably.
or m a t e r i a l
S o m e o f t h e banks a r e buying cheaper grades
f o r t h e various
sizes
t h a n other banks.
A s
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358
the u s e o f e a c h s i z e i s p r a c t i c a l l y t h e s a m e i n a l l d i s tricts,
t h e Committee r e e l s t h a t t h e mere f a c t t h a t s u c h
bags a r e i n u s e i s s u f f i c i e n t p r o o f t h a t t h e y a r e e n t i r e l y
T h e Conmmittes, therefore,
satisfactory f o r t h e purpose.
recommends t h e following i n this connection.
i - That t h e banks t r y
t h e l e a s t expensive fabric
that i s i n use b y any other bank r o r each size a n d keep
the C o m m i t t e e f u l l y a d v i s e d a s t o t h e i r experience.
2 - That t h e b a n k s a t t e m p t
t o reduce t h e number
of
sizos t h e y a r e carrying a s better prices c a n b e obtained
on larger q u a n t i t i e s .
An a n a l y s i s
w a s made some time ago
o r t h e various
sized bags t h a t were used b y all t h e Federal reserve banks
and branches a n d a v e r a g e s i z e s W
range o f size.
a r r i v e d a t ror each
I t i s belived t h a t t h e following sizes
should a m p l y t a k e c a r e o f t h e coin, c u r r e n c y a n d c o u p o n
requirements
o f a n y o f t h e banks.
T h e recommended
sizes
and t h e i r u s e s a r e a s f o l l o w s :
82,000 Gold, G o l d Bars a n d mixed c o i n o f
S h e glegeecei: or Rayricoe
Up t o 5 0 0 notes.
400 t o 700 notes, $5,000 Gold, $100 Silver
1,000 notes, $500 Silver.
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17-1/2 ‘ 2 , 5 0 0 notes, $200 nickels, $50 pennies .
eA,
$ 1 , 0 0 0 silver
23-1/2 4 , 0 0 0 notes, canceled coupons.
quality o f the thread used i n stitching a n d the
stitching have m u c h t o d e with t h e strength o f the
COIN BAGS.
total e x p e n d i t u r e f o r t h i s s u p p l y b y t h e e n t i r e
systomi
s n o t v e r y great.
I n s o m e cases, e c o n o m y c o u l d
be brought a b o u t t h r o u g h t h e p u r c h a s e
of a
long f i b r e r o p e
coated tag stock instead o f the so-called "linen" b y using
a basic s t o c k a n d p r i n t i n g
i n colors a n d t h r o u g h t h e s i m -
The C o m m i t t e e w o u l d b e g l a d t o
furnish
a n y desired information
i n this connection,
Adding Machine Rolls.
The Conmittee realizes t h a t t h e grade o f paper i s
controlled
b y individual r e q u i r e m e n t s .
the c h e a p e s t
gradé consistent
I t believes t h a t
w i t h usage
i s being purchased,
Typewriter and Adding Machine Ribbons.
It i s r e c o m m e n d e d
t h a t t h e banks
t e s t o u t various
kinds o f ribbons o n similar w o r k s o that a
satisfactory
ribbon m a y b e procured f o r a s little c o s t a s possible.
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Federal Reserve Bank of St. Louis
Pemeurs
Some b a n k s a p p e a r t o b e p a y i n g m e c h h i g h e r p r i c e s
then o t h e r t a n k s f o r t h e s a m e b r a n d o f pencils.
T h e Come-
mittee r e c o m m e n d s t h a t n o t m o r e t h a n t w o g r a d e s
o f pencils
(other t h a n special, s u c h a s colored, indelible, etc.) b e
purchased;
o n e f o r official u s e t o cost between 3 0 ¢ a n d
40¢ a dozen a n d one f o r general u s e t o cost u p t o 20¢ per
dozen.
I
n t h e tabulation m a n y g o o d pencils b e t w e e n t h e
above p r i c e r a n g e s a r e listed.
Paver,
The C o m m i t t e e a s s u m e s t h a t p i n s p u r c h a s e d
b y any
Federal r e s e r v e b a n k o r b r a n c h a r e s a t i s f a c t o r y f o r t h e
purpose f o r w h i c h intended.
T h e Committee recommends t h a t
the Purchasing Agents o f the banks b e asked t o g o further
inte t h i s q u e s t i o n a n d a t t e m p t
t o buy a
satisfactory p i n
for l e s s money.
Gem Clips.
The C o m m i t t e e r e c o m n e n d s t h e s a m e i n this c o n n e c t i o n
as i n t h e c a s e o f pins,
Lead Seals.
The Committse will t r y t o arrange f o r a blanket contract
f o r lead seals
with one
o f the standard manufacturers
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561
lower price t h a n t h e majority o f banks a r e n o t paying.
AS s o o n a s s u c h a
contract b e c o m e s e f f e c t i v e ,
y o u will b e
advised,
ia GU, S 0 8 psc
By a n exchange
o r information
a s t o sources
o f supply,
economy c a n p r o b a b l y b e b r o u g h t about.
Rubber B a n d s .
The Committee will attemot t o arrange f o r a blanket
a standard m a n u r - c t u r e r
may h a v e t h e p r i v i l e g e
o f buying a t a
s o that e a c h bank
lower p r i c e t h a n
that w h i c h i s g e n e r a l l y p a i d ,
Sealing Wax.
The Committee h a s nothing definite t o recommend i n
connection, b u t i t would like t o point o u t t h e ‘act
price i s n o t t h e o n l y f a c t o r
quality h a s a
t o b e consi
a
s the
very direct tearing o n the amount o f wax
used,
The Committee will b e glad t o hear t o what extent y o u
digest o f the cuestionnaires w i l l b e o f assistance t o y o u r b a n k .
I t will a l s o w e l c o m e a n d a p p r e c i a t e
any suggestions w h i c h y o u m a y wish t e offer relative t o
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Federal Reserve Bank of St. Louis
S62
the Jdommittee's w a r k t o date o r t o its future activity.
Very truly yours,
C. A . Worthington, Chairman
BY
Secretary, C o m m i t t e e o n Standardization a n d P u r c h a s e o f Supplies.
The Chairmans I
have o n l y o n e sug~estion t o make
with r e g a r d t o t h i s report.
T h e report contains recom-
mendations w i t h regard t o some collaboration between t h e
purchasing a g e n t s o f t h e v a r i o u s r e s e r v e p a n k s
t o insure
full benefit b y each bank o f the recomendations
report.
i n the
I n a s m u c h a s the m a n who does that work i n our
bank i s a
member
think i t has b e e n fol-
o f t h e committee, I
lowed u p p r e t t y c l o s e l y
i n N e w York,
b u t there m a y b e some
doubt a s t o w h e t h e r c a c h r e s e r v e b a n k i s i n c o m m u n i c a t i o n
with t h e c o m m i t t e e a n d g e t t i n g t h e b e n e f i t
on supplies p u r c h a s e d
o f the prices
a t somewhat l o w e r rates,
Governor M c e D o u g a l s
e
e have a
memorandum
o n that r e -
port t o t h e e f f e c t t h a t t h e report s h o u l d b e c a r e f u l l y
studied
b y t h e o p e r a t i n g officers,
the r e p o r t b e accepted,
will
b e done.
and I
would s u g g e s t t h a t
w i t h t h e understanding t h a t t h a t
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Federal Reserve Bank of St. Louis
563
Governor S e a y : I
will s e c o n d
have a
Governor Norris: I
t h e motion.
few comments o n the report
which I will make f o r what t h e y m a y b e worth, although i t
is doubtful i n m y mind h o w much they will b e worth,
We h a d a
representative
o n the committee w h o w a s a
purchasing agent a n d nothing more. I
mere
do not k n o w the
other four members o f the committee, b u t I understand that
some, i f not a l l o f them, a r e officers o r managers o f roserve b a n k departments a n d n o t s t r i c t l y p u r c h a s i n g agents.
I must admit that our ropresentative i s a rather excitable
and e x p l o s i v e s o r t o f fellow.
W h e n this roport w a s s e n t
to h i m for his signature h e rather went u p i n the air
and said he could not sign it. I
did not have time t o
study i t myself, b u t I asked Mr. Hutt, o u r Deputy Governor,
to g o over i t with h i m a n d find o u t whcther o r not there
was a n y t h i n g s u b s t a n t i a l
i n h i s objections.
W r . Hutt did
go over i t with h i m a n d reported t o m e that o n two points
he t h o u g h t t h i s r e p r e s e n t a t i v e
the r e p o r t c o n t a i n e d a
o f ours w a s right;
that
general r e c o m m e n d a t i o n t h a t p u r c h a s -
ing agents b e encouraged t o correspond w i t h o n e another,
but t h a t n o m e t h o d o r m a c h i n e r y w a s s e t u p b y w h i c h t h e y
should
d o so.
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564
The o t h e r o b j e c t i o n i s t h e s t a t e m e n t
graph o n the first p a g e o f t h e report:
o f t h e third para-
‘ T h e committee h a s
already a r r a n g e d b l a n k e t c o n t r a c t s w i t h c e r t a i n manu‘facturers c o v e r i n g t h e p u r c h a s e
and gem clips".
o f l e a d seals, r u b b e r b a n d s
H i s objection t o that is, according t o
his statement, t h a t whatever arrangement h a s b e e n made i n
was
reference t o these contracts/without a l l members o f the committee being given opportunity t o get t h e lowest prices o n
those p a r t i c u l a r s u p p l i e s . I
inauired w h e t h e r t h a t w a s a
mere academic objection o r whether h e had reason t o believe
or k n e w t h a t h e , f o r instance, c o u l d g e t l o w e r p r i c e s
those things,
on
t o which h e replied that h e c a n a n d that h e
was n o t g i v e n t h e opportunity.
As I
say, I
submit t h e s e n o t a s f a c t s t h a t a r @ W i t h i n
my personal knowlwdge b u t which upon investigation i n our
office appear t o b e objections well taken.
The C h a i r m a n :
A
g t o the matter
o f
eommunication b e t w e e n t h e p u r c h a s i n g agents,
h e refers
the fact that t h e method o r machinery i s not s e t up.
to
I t
occurs t o m e that t h e method i s t h e English language a n d
that t h e machinery i s the typewriter.
T h e y d o not need
anything m o r e t h a n t h a t f o r t h e p u r p u s e
o f intercommunica-
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Federal Reserve Bank of St. Louis
ton.
A s t o these bids, t h i s m a n i s a member o f the com-
mitteee a n d m u s t h a v e a t t e n d e d meetings,
a n d m s t have
known that this effort w a s being made t o get supplies a t
lower prices, a n d i f h e failed t o get notice o f it, w h y
time.
Governor Norris:
d
o n o t t h i n k h e understood t h a t
an effort was being made, b u t understood t h a t i t was desirable t h a t i t s h o u l d b e made.
T h e committee s e n t o u t a
questionnaire t o get t h e prices t h a t t h e various banks w e r e
paying r o r various s u p p l i e s ,
b u t according t o his statement
there w a s never a n y request t h a t t h e members o f the commit
tee r i n d o u t t h e b e s t p r i c e s
a t which these supplies should
be “bought.
The Chairman:
P a r d o n me, Governor Norris;
lection i s t h a t t h e c o n m i t t e e b e f o r e
i
n
m y recol-
g prices
on
these s u p p l i e s i n v e s t i g a t e d t h e q u e s t i o n o f w h i c h b a n k
was buying a t the lowest price, a n d e a c h bank was renuested t o l o o k i n t o i t .
I f Philadelphia w a s b u y i n g a t a
price t h a n t h e other banks ¢
lower
a m surprised that h e did not
advise t h e committee.
Governor Norris:
small i n comparison, f
c o u r s e o u r purchasés w e r e
e x a m p l e , w i t h yours, b u t h e claims
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Federal Reserve Bank of St. Louis
366
that o n a
contract
i n which a
would p r o b a b l y participate,
quantity, a
large
n u m b e rf
o the banks
w h i c h would cover a
very large
larger q u a n t i t y t h a n a n y o n e b a n k w o u l d b u y ,
that i t w o u l d h a v e b e e n p o s s i b l e
t o g e t prices f o r these
things l o w e r t h a n t h e p r i c e s t h a t a n y i n d i v i d u a l b a n k w o u l d
pay.
Governor McDougal:
T h i s committee w a s appointed
after d e l i b e r a t i o n a n d t h c m e n w h o w e r e s e l e c t e d w e r e s e l e c t ed because
jobs.
o f t h e belief t h a t t h e y w e r e f i t f o r their
T h e m a n f r o m Philadelphia w a s recommended
or w e w o u l d n e v e r h a v e p u t h i m on.
stated I
t o us
U n d e r t h e circumstances
think h e n e v e r s h o u l d h a v e s i g n e d t h e report,
should have made a
minority report.
but
T h a e i s the first I
have heard o f any dissatisfaction o n the part o f any member
of t h e committee.
Governor Norris:
Governor McDougal:
H e d i d make a
minority report.
T h e y h a d o n e meeting
i n Chicago+
they havo given t h e matter careful s t u d y a n d I think the
committee h a s justified i t s appointment a n d t h e expense
of 7 5
I
obligates
n regard t o t h e contracts, t h e r e i s nothing which
a n y F e d e r a l r e s e r v e b a n k t o m a k e u s e o f them.
The intent w a s t o canvass t h e situation and,if possible,
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Federal Reserve Bank of St. Louis
367
ascertain where supplies c o u l d b e bought o f the proper
standard
T h e y have made some very
a t t h e lovest rate.
good sugeestions,
a m very sorry that w e g o t t h e
and I
wrong m a n i n y o u r bank.
d o n o t k n o w t h a t w e did.
Governor Norris: I
thought y o u s a i d h o w a s v e r y
Governor MgDougal: I
excitable.
W e . i a excitable,
Governor Norris:
very
b u t be. 1s. a
good p u r c h a s i n g agent.
Governor S e a y :
activities
o f this committee
i s o n the face o f i t full
justification f o r t h e a p p o i n t m e n t
o f t h e committee.
ing had a very good m a n o n the committee, I
that t h e r e w a s a n y a t t e m p t
the purchasing agents.
tain bids,
b y the
T h e v e r y information developsd
Hav-
d o not know
t o invade t h e prerogatives
of
T h e committee h a s secured cer-
o f which t h e Federal reserve banks c a n take a d -
vantage o r not, as. t h e y p l e .seé.
A s t o t h e suggestion o f
correspondence between t h e purchasing agents t h e utility
the
of that suggestion i s shown a t once b y the fact that
agent a t Philadelphia says that h e c a n buy something
cheaper t h a n t h e c o m m i t t e e f o u n d i t c o u l d b e b o u g h t a t ,
and i f h e will b e good enough t o communicate w i t h t h e pur-
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Federal Reserve Bank of St. Louis
chasing agents o f the other banks t h a t fact, i t will give
them t h e a d v a n t a g e
o f it.
T h a t i s a n illustration
in
point, a n d I second t h e motion that w e adopt t h e report,
which b i n d s n o F e d e r a l r e s e r v e b a n k , b u t @ i v e s
i t infor-
mation w h i c h w i l l e n a b l e i t i n m a n y cases, a c c o r d i n g t o
the f a c t s developed,
t o m y things v e r y m i c h cheaper t h a n
they have b e e n buying them,
Governor B i g g s : I
cheaper
i n some cases
Governor Seay:
understand
i t was 4 0 0 p e r c e n t
o n rubber t a n k s ,
I t i s probably a
fact that t h e federal
reserve banks were n o t given opportunity t o invite bids
in their localities, w i t h the understanding t h a t t h e bidders might b e able t o furnish other Federal reserve banks.
It was n o t necessary f o r t h e m t o d o that.
T h e y just d e -
veloped s u c h information a s could b e developed, a n d they a r e
giving t h e other banks t h e benefit o f it, t o take advantage o f i t o r not a s they please,
Governor Young:
i f I remember correctly, o u r pur=
chasing agent told m e that w e c a n d o much better o n some
of these items, b u t w e did n o t feel that w e were bound b y
any o f t h e c o n t r a c t s t h a t t h i s c o m m i t t e e e n t e r e d into.
I f
Philadelphia c a n b u y G e m c l i p s c h e a p e r t h a n a n y b o d y e l s e
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Federal Reserve Bank of St. Louis
569
can b u y t h e m t h e r e i s n o r e a s o n w h y M i n n e a p o l i s s h o u l d n o t
buy t h r o u g h t h e P h i l a d e l p h i a a g e n t .
I f , o n the other
hand, w e c a n buy rubber bantts cheaper t h a n a n y other bank,
then w h y should n o t t h e purchasing agents b u y rubber bands
through t h e Mjnneapolis bank.
T h a t i s t h e way I thought
it would work out.
Governor Seay:
I t will i f t h e agents will u s e t h e
machinery o f the typewriter t o communicate those facts t o
the o t h e r banks.
The Chairnans: I
d o n o t s e e w h y i t was n o t t h e proper
thing f o r y o u r m a n a n d f o r G o v e r n o r Norris!
that
a t once
t o t h e attention
m a n t o bring
o f t h e committee
a n d have
the committee investigate a n d advise t h e reserve banks.
Governor iicDougal:
T h e r e w a s o n e development i n con-
nection with t h e investigation which i n itself was enough
to justify the appointment o f the committee.
the f a c t t h a t t h e y f o u n d out, w i t h r e s p e c t
supplies--- w h a t t h e y w e r e I
T h a t was
t o some specific
d o n o t know--- t h a t t h e various
banks were buying t h e m from the same distributors a n d pay-~
ing prices, s o m e f i f t y p e r c e n t a n d s o m e 1 0 0 p e r c e n t o v e r
what t h e others w e r e paying.
T h a t was a
very interesting
development, a n d the committee d i d g o ahead a n d secure a
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Federal Reserve Bank of St. Louis
570
promise f r o m the distributors t h a t t h e y would sell t o aii
banks
o n the same basis a n d that t h e y would m a k e t h e pric
charged t o a n y b a n k t h e g e n e r a l price. I
think t h a t w a s
a very i n t e r e s t i n g d e v e l o p m e n t .
The C h a i r m a n s
committee
T h e motion i s that t h e report
b e acceptcd,
a n d that e a c h Governor
o f the
b e requested
to a s k his purchasing agont t o got into communication w i t h
the c o m m i t t e e w i t h r e g a r d t o t h e various t h i n g s b r o u g h t
out
a t this meeting,
are b o u g h t c h e a p e r
a n d with regard
t o cases where supplies
i n certain places t h a n t h e rates q u o t e d
by the committee, t h a t that shall also b e brought t o the
attention
o f t h e committee.
T h a t m o t i o n h a s b e e n seconded.
(The motion, having been duly seconded, w a s carried.)
The Chairman:
T h e next topic i s 4-~(a)-4, report o f
insurance committce.
4-(a)-4 R e p o r t o f Insurance Cormittee.
That r e p o r t i s a s follows:
Since t h e l a s t c o n f e r e n c e
n o n e w matter h a s b e e n refer-
red t o the Insurance Committee a n d thereris, therefore,
nothing n e w t o report,
is d i r e c t e d
b u t t h e attention o f t h e conference
t o t h e fact t h a t under t h e h e a d o f unfinished
business t h e r e a r e t w o i n t e r - i n s u r a n c e p l a n s w h i c h w e r e r e -
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Federal Reserve Bank of St. Louis
ported u p o n b y the committee under date o f April 28, 1 9 2 1
to t h e l a s t conference,
hereto),
( a s p e r c o p y o f report a t t a c h e d
o n e f o r t h e self-insurance
tite: plsak,.
o f t h e employees g r o u p
T h e Board raised t h e same legal objections
to both o f these nlans a n d the last word o n the subiect a s
quoted o n t h e l a s t p a g e o f t h e s a i d r e p o r t w a s a
letter
from t h e F e d e r a l R e s e r v e b o a r d i n w h i c h t h e f o l l o w i n g s t a t e ment w a s made:
"The Board has not decided whether i t is opposed t o
inter-insurance plans i n principle (i.¢e., a s a matter o f
policy); b u t the Board would be unwilling t o approve any
such plan until Congress h a s amended t h e l a w i n such a way
as t o r e m o v e a l l d o u b t a s t o t h e l e g a l i t y o f F e
Banks participating i n such arrangements."
The banks undoubtedly would have a n opportunity t o
save a
considerable a m o u n t o f m o n e y t h r o u g h t h e o p e r a t i o n
of either o r both of these plans.
any p r o g r e s s
T h e only way t o get
i n this direction, h o w e v e r ,
would b e t o get
the Board t o decide whether o r not i t i s opposed t o interinsurance p l a n s
in principle,
i n principle a n d ,
i f the Board approved
t o take appropriate steps toward procuring
the legislation deemed essential b y the Board.
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Federal Reserve Bank of St. Louis
Reppectfully s u b m i t t e d ,
BE. R . KENZAL,
C o a i r m a n , I n s u r a n c e C o m m i tree.
November 3 , 1924,
The m a i n r e p o r t
o f t h e comnaittee w a s s u b m i t t e d
at t h e M a y Conference,
T h e r e i s only one item t o b e
specifically d e a l t w i t h i n c o n n e c t i o n w i t h t h e report,
and
that i s a plan o f self insuranco t o b e arranged between
the twelve reserve banks w a s considered b y the committee
and i t was f o u n d t h a t t h e r e w a s a
legal q u e s t i o n a s t o
the right o f the reserve banks t o join together i n insuring themselves.
likewise a p p l i e s
T h i s applies
t o t h e fidelity bonds a n d
t o the group insurance policies
o n the
lives o f the clerks.
The q u e s t i o n h a s b e e n s u b m i t t e d
t o t h e Federal Reserve
Board and the Board has taken the position, I understand,
that t h e y c o n s i d e r
t h e plan r o r inter-bank self-insurance
as illegal a n d they d o not care t o pass u p o n t h e cuestion
large
or p r i n c i p l e i n v o l v e d .
We-.-believe there i s a
saving t o b e effected,
i f w e h a v e t h e legal power t o d o
so, b y s o m e p l a n o f i n t e r - b a n k s e l f - i n s u r a n c e ,
a n d the
committee h a s n o w r e c o m m e n d e d t h a t t h e B o a r d b e a s k e d t o
pass u p o n t h e q u e s t i o n o f principle i n v o l v e d ,
and ik ney
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Federal Reserve Bank of St. Louis
SO
7s
de f a v o r i n t e r - b a n k s e l f - i n s u r a n c e t h a t t h e n s t e p s b e
taken t o g e t t h e l e g a l a u t h o r i t y f o r d o i n g i t .
Governor F a n c h e r : I
move
Governor Biggs: L
Governor Young:
t h e adoption
o f t h e report.
will second-27;
O u r directors h a v e taken definite
BG ULOn O n G h i s . T h e y d o n o t b e l i e v e
self-insurance a n d d o n o t a p p r o v e
i n t h e principle
of
o f t h e p l a n presented.
I would have t o vote n o o n this.
The Chairman:
separate t y p e s
O f course w e are dealing w i t h two
o f insurance.
O n e i s t h e fidelity insurance
and the other i s lifc insurance.
Governor Young: I
understand that, b u t they disap-
prove o f the whole thing.
The Chairman:
I
n both cases?
Governor Young: ,
Yes.
The Chairman: I
have s o m e q u e s t i o n a b o u t t h e l i f e
insurance, b u t I have very little mestion about the wisdom o f inter-bank self insurance w i t h regard t o t h e fidelity
of .cieraa. I
reserve system,
think with 12,000 employes i n the Federal
a n d w i t h t h e r e p o r t o f premiums a n d losses
which w e have n o w over a period o f years, t h a t i f w e develop s o m e s c h e m e o f s e l f - i n s u r a n c e
w e probably @muld save
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Federal Reserve Bank of St. Louis
376
quite a
l o t o f money.
T h e r e was a
motion t h a t t h e report
be a c c e p t c d a n d t h e r e c o m m e n d a t i o n s a d o p t e d .
Governor B a l l e y s
W
i
s
R a v e . bO. V e r e 16." oOnm sonat.
Our Board o f Directors h a s discussed i t fully a n d reached
the s a m e c o n c l u s i o n a s s t a t e d b y G o v e r n o r Young.
Governor Calkins: I
The Chairman:
will s e c o n d t h e motion.
T h e report contemplates t h a t t h e
Board b e a s k e d t o p a s s o n t h e g u e s t i o n o f principle,
then i f i t i s found t o b e illegal,
and
w e will consider whether
steps should b e taken t o get legislation t o amend t h e act.
could vote a y e t o that.
Governor Baileys: I
Governor McKinney:
$ 6 . ¢an-2s
Governor iicDougal:
T h e r e i s only one reason f o r
pushing this matter, a n d that i s t o help t h e Board dean
up s o m e o f t h e i r business.
T h e y a r e v e r y anxious
everything c l e a n e d u p . I
a m opposed
t o have
t o t h e inter-insur-
ance plan, b u t t h e Board has this a s unfinished business
on t h e i r hands,
a n d w e p u t i t there.
The C h a i r m a n :
the situation.
u s frame a
motion w h i c h meets
C e r t a i n l y t h e first o n e does not.
Governor Young:
Chairman,
L e t
W h a t d i f f e r e n c e d o e s i t make, i r .
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Federal Reserve Bank of St. Louis
oly a
The Chairman: >
nob s e e E h a t - i t m a k e s a n y -dir-=
Porence.,
Governor McDougal: I
think I can vote for this reoo-
sution i f if. i s “properly framed.
Governor Seay:
I t would n o t b e necessary i f there was
unanimous d i s a p p r o v a l
The Chairman:
o f t h e p l a n o r idea.
H e t w e f i r s t v o u s U p o n e a motion w i i e n
will d i s c l o s e w h e t h e r
w e d o o r d o not favor inter-bank self-
LNSUraAnCe,
Governor McDougal: I
The Chairman:
will make that motion.
G o v e r n o r McDougal moves t h a t i t i s
the sense o f the meeting that t h e Federal reserve banks
not approve o f inter-bank self-insurance,
Governor Y o u s :
Governor
= . Seconded.
Glkins:
S h o u l d
w e not consider
t h e two
kinds o f insurance, fidelity and life?
Governor :iicDougals I
think’ the: question arose i n
connection w i t h the fidelity insurance alone a n d not i n
connection with the life insurance.
The Chairman:
Y o u will f i n d life insurance covered
in U e see mem.
Governor McDougal:
B u t i believe t h a t t h e pension
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Federal Reserve Bank of St. Louis
plan bill, t h e l e g i s l a t i o n t h a t w e a r e
from Congress, w i l l t a k e c a r e o f t h e l i f e i n s u r a n c e f c a -
tare o f -10.
C o u l d y o u n o t - s e p a r a t e t h e m i n put-
Governor Seay:
bing the motion.
S o m e o f u s might b e i n favor o f fidel-
a n d n o t i n f a v o r o f g r o u p l i r e insurance.
ity insurance,
T h e Chair will promptly a s k f o r a
The Chairman:
vote
on a n y m o t i o n G h e e t s ous.
Governor Harding:
W o u l d n ' t i t b e well t o vote o n
the o r i g i n a l m o t i o n ?
The Chairman:
G o v e r n o r Harding h a s asked f o r a
vote
on the original motion, w h i c h i s seconded, a n d which was
that t h e B o a r d b e a s k e d t o a d v i s e t h e f e d e r a l r e s e r v e b a n k s
as t o t h e i r p o s i t i o n
insurance,
with later.
o n the principle
o f inter-bank self-
T h e question o f legality h a s g o t t o b e dealt
P
F it d o e s , a s w e are advised, require
legislation, t h e n t h e ouestion will arise a s t o whether i t
is n e c e s s a r y t o d o anything.
it i s concerned,
w e have a
S
o f a r a s t h e principle
pending m o t i o n ,
cuestion h e r e o f u n f i n i s h e d b u s i n e s s ,
Was t h e motion,
There
of
zie
w e will c a l l it.
a s I have stated it, seconded?
Governor Bailey:
T h a t is, t o adopt t h e report o f
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Federal Reserve Bank of St. Louis
the c o m m i t t e e ?
The Chairman: _
mean a s I stated i t just now, s i m -
ply t o a s k t h e F e d e r a l R e s e r v e B o a r d
t o Sive-an expression
of t h e i r v i e w a s t o t h e p r i n c i p l e
bank S e f insurance,
o
f inter-
w h i c h w o u l d a p p l y t o b o t h t h e s e items,
that is, t h e fidelity bonds a n d life insurance that a r e
now provided f o r f o r t h e clerks,
w h e n that question i s
answered, t h e n w e must determine whether,
opinion o f counsel a s a
matter
take t o h a v e t h e l a w a m e n d e d
we a r e o p p o s e d
i n view o f the
o f policy w e should under-
s o a s t o p e r m i t i t , o r whether
t o it.
Governor W e l l b o r n s
W w e won't k e e x p r e s s i n g o u r o p i n -
Lon a g a i e
The C h a i r m a n :
N O t Ste i s .
Governor iellborn:
our v i e w s
D o n ' t y o u suppose t h e Board wants
o n this matter?
Governor Harding: I
to T h e peoposition; I
have some individual views a s
believe that a n organization hav-
ing 1 2 , 0 0 0 e m p l o y e s h a s g o t a
ance,
but I
proper b a s i s f o r s o l f i n s u r -
d o n o t k n o w what t h e views o f our directors
would be.
Governor McKinney:
T h a t i s m y position exactly.
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Federal Reserve Bank of St. Louis
580
Governor Harding:
T h e r e i s n o u s é o f m y expressing
my individual views. I
have discussed i t once o r twice
with our directors, a n d i n view o f m y discussions I
at a
loss t o k n o w h o w t h e y w o u l d v o t e o n it. I
prepared
am
a m not
t o c o m m i t t h e B o s t o n B a n k t o t h e proposition,
All t h a t I
could d o w o u l d b e t o e x n r e s s
m y individual view.
It scems t o m e that n o matter what o u r individual views
are, i f the Board i s against it, t h a t seems t o settle it.
Therefore, I =ws think t h e first motion t s a very proper m tion.
Governor S e a y :
Y o u c a n n o t a v o i d t h e conclusion,
i f
we a s k t h e B o a r d t o c o n s i d e r t h i s , t h a t i t will i m p l y
that t h o s e p r e s e n t a r e i n favor o f it, e l s e w h y a s k t h e
Board to. consider 2 0 4
suggest t h a t
Governor H a r d i n g : I
referendum
o n the proposition
an e x p r e s s i o n o f s e n t i m e n t
i f you want a
i t b e t a k e n i n t h i s way, n o t
of a
board o f directors
o n
the matter, b u t just a n expression o f his opinion a s t o
how t h e b a n k f e e l s a b o u t i t .
The C h a i r m a n : I
not g i v e n e x p r e s s i o n
understand
t h a t t h e directors
have
t o t h e i r views.
Governor Harding:
T h e y have discussed
i t some i n our
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Federal Reserve Bank of St. Louis
581
bank but have n o t given a n expression o f views.
The Chairman:
T h a t t s t h e situation.
Governor Seay:
i n v e w Yorks
A n d t h e same thing with us.
Governor Norris:
Governor Young:
m e @ e Mave n e v e r e v e n d i s c u s s c d i t .
Q u r directors h a v e taken action o n
it and have disapproved i t i n principle.
Governor Calkins:
O u r b o a r d h a s n o t t a k e n a n y action.
My individual opinion i s i n favor o f inter-bank insurance
applied
t o fidelity insurance,
Governor Biggs:
b u t not
t o life insurance.
N o action h a s b e e n taken with us,
but m y v i e w i s s i m i l a r
Governor Fancher:
t o that expressed
b y S a n Francisco.
4 ~ @ have h a d n o action b y o u r
board.
Governor Mckinney:
There h a s b e e n s o m e
O u r Board has taken n o action.
c t s
Governor iicDougal:
G L S C U S S I OMe Ot iste
O v r board h a s given considera-
tion from the standpoint o f inter-bank insurance a s i t
relates t o fidelity insurance, a n d have declared’ themselves
OULOSsed boris.
Governor Bailey:
Governor “ellborn:
The Chairman:
Y W6. are cpposéed t a it.
A n d = w e a r e opposed
G o it.
I t seems t o m e that t h e majority o f
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Federal Reserve Bank of St. Louis
382
those h e r e a r e n o t i n a
position t o e x p r e s s t h e v i e w s
their directors. T h e r e f o r e ,
to g e t p r o g r e s s
of
i t seems t o m e t h e best w a y
i s t o g e t a n expression f r o m t h e Board
as t o t h e q u e s t i o n o f p o l i c y a n d principle.
A r e y o u ready
for t h e motion?
(The motion, having been duly seconded, was carried.)
The Chairman:
T h e next i s Report o f the Committee
to Study cost o f securing credit information.
4-(a)-5 R e p o r t
o f Committee
t o Study t h e
Cost o f Securing Credit Information.
No r e p o r t h a s b e e n received.
Governor licDougal:
Govermr
Committee's
Seay:
report
M r . Childs w a s Chair-
T h e r e i s a report o n that.
T h e r e
i s a
o n Efficiency
reference
t o i t i n the
a n d economy
a n d salaries.
That i s the only o n e I know about.
Mp. Harrisons J
have never s e e n a n y separate report
tie COnmiirEee = psclt
(This topic w a s passed f o r t h e moment.)
The Chairman:
4-(b)-1.
T h e next topic i s 4-(b)
R e p o r t o f P e n s i o n Committee,
Mr. K e n z a l C h a i r m a n .
That rcport i s a s follows:
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Federal Reserve Bank of St. Louis
585
"On February 1, 1924, t h e Federal Reserve Board
adopted a
rcport o f a
committee
o f the Board expressing
general s y m p a t h y w i t h t h e p r i n c i p l e s u n d e r l y i n g t h e P e n s i o n
Plan but stating that t h e Board was opposed:
(1)
t o t h e general l i f e insurance principle;
(2) $ 0 : the- i n e l u s i o n
o f a n y employees
having salar-
ies over $5,000 per a mun;
(3)
t o the participation o f member banks i n the plan;
with t h e added stipulation that t h e contribution o f Federal
reserve banks b e limited t o 5 0 per cent o f the total cost
of a d m i n i s t e r i n g t h e fund.
At a
meeting o f t h e P e n s i o n C o m m i t t e e
ence, a t t e n d e d
o f this gonfer~
b y a l l o f i t s e x p e r t a d v i s o r s a n d counsel,
it w a s t h e unanimous v i e w t h a t w h i l e n o n e o f t h e f i r s t
three l i m i t a t i o n s
prevent a
named
b y the Board would necessarily
fairly satisfactory,
a l t h o u g h limited, o p e r a t i o n
of the plan f o r a large percentage o f the employees i n
Federal reserve banks, t h o s e limitations nevertheless w o u l d
eventually c a u s e t h e p l a n
t o prove inadequate
f o r t h e pur-
poses f o r w h i c h i t was i n t e n d e d a n d i t w a s t h e u n a n i m o u s
view o f y o u r c o m m i t t e e t h a t t h e B o a r d s h o u l d b e r e q u e s t e d
to h e a r t h e a d v i s e r s
o f your committee
o n t h i s subject.
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Federal Reserve Bank of St. Louis
384
Accordingly, a
conference
o f the committee w i t h t h e
Federal Reserve Board was arranged a n d held o n October 30,
1924, a t which t h e features o f the plan were quite fully
discussed a n d i n t h e c o u r s e o f w h i c h i t w a s e m p h a s i z e d
by y o u t c o m m i t t e e t h a t , n o t w i t h s t a n d i n g a n y p r e s e n t l i m i -
tations o n the scope o f the inaugural operations o f the
plan, legislation should b e obtained o f such a character
as w o u l d n o t p r e v e n t s i t h e r a t t h e i n a u g u r a t i o n
o f the plan
or a t a future time, t h e inclusion o f the features hcretofore r e c o m m e n d e d
b y your committee
a n d approved
b y each
of t h e t w e l v e F e d e r a l r e s e r v e b a n k s .
At the meeting o f October 5 0 there w a s also discussed t h e p r o v i s i o n s
o f the plan f o r providing pensions f o r
the o f f i c e r s a n d employes
State Department,
o f t h e Foreign Service
a s indicated
o f the
i n t h e Rogers Bill, w h i c h
became l a w i n J u l y o f this y e a r ,
a n d t h e more liberal pen-
sion provisions o f that p l a n were compared w i t h t h e relative provisions o f the p l a n recommended b y your committee.
The r e s u l t
o f this c o n f e r e n c e w a s t h a t t h e c o u n s e l f o r
your committee w a s requested t o redraft t h e bill which has
been p r e p a r e d f o r i n t r o d u c t i o n
i n t h e Senate, b r i n g i n g i t
down t o date a n d leaving i t i n such form a s would n o t
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Federal Reserve Bank of St. Louis
prohibit
and f e
comuittee,
c o
o
t t h e plan a s recommended
s a v i n g
b y your
< 6 detertiination o f ali details o r
the plan and its supervision t o the #ederal Reserve Board,
riended
b y your m i t t e e ,
a n d t o promptly
rorward t o each member o f the Board c o p y o f the bill a s
ip. Cyrtis, t h e counsel r o r t h e connittec,
in r e d r a r t i n g
t h e bill accordingly
be. a
hands o f t h e membor
o f t h e federal
and it
thie
R e rve Board
this c o n f e r e n c e c e n v e n e s .
on Pensions."
Governor Young:
s
e
a
p
o
r
t b e accepted
and approved.
The Chairman: I
suppose copies o f the redrafted bill
have b e e n d i s t r i b u t e d ?
Governor Y o u n g :
N
O i r , Chairman,
The C h a i r m a n :
couple
o f copies f r o m “Ir, C u r t i s o n l y a
it has n o t b e é n distributed i t will be.
f e w days.ago,
I f
i p . Curtis h e s
redrawn t h e b i l l i n s u c h f a s h i o n a s t o m e e t t h e c h a n g e d c o n -
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Federal Reserve Bank of St. Louis
586
ditions,
t e c
1 g
i n the names o f the incorporators,
particularly
o n account o f the change
incorporated
i n it, I
objections
i n personnel.
think, t w e l v e c h a n g e s
H e has
t o meet. t h e
o f t h e c o u n s e l f o r t h e Federal R e s e r v e Board,
and h e considers t h a t t h e bill i s n o w i n good shape f o r
consideration
b y t h e Federal r e s e r v e b a n k s a n d t h e Feceral
Reserve B o a r d ,
T h e bill w a s n o t printed
i n time t o b e
distributed a t this meeting.
Governor « D o u g a l :
ca go
n e t i m e ago.
w
e received a
c o p y o f i t i n Chi-
I t may b e interesting t o the confer-~
ence t o k n o w t h a t t h e c o m m i t t e e h a s h e l d t w o meetings.
Kenzel
w a s v e r y insistent
that
w e come together prior
i r .
t o
this conference, feeling t h a t some forward s t e p should
be taken b y the committee o r the committee b e discharged.
We held a meeting i n New York rirst, a n d a t that time there
were p r e s e n t a l l m e m b e r s
experts,
waich
Me. Curtis.
time
included
o f t h e cormittee,
ti.
Beare.
H P .
>
a n d all o f the
Buck
a n d Mr.
Mayerand
V e r y careful consideration w a s g i v e n a t that
t o the most recent action
Board i n which,
o f the Federal Reserve
a s I remember it, t h e y approved t h e plan
in principle b u t i m p o s e d r e s t r i c t i o n s w h i c h w o u l d r e a l l y
make t h e entire undertaking impracticable a n d unsatisfactory.
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Federal Reserve Bank of St. Louis
387
It was agreed a t that time that t h e cornmittee would b e
T h e hearing was
entitled t o a hearing b y the Board.
given a n d a l l p a r t i e s I
have mentioned
w h o c o u l d n o t come.
except sir. Fancher,
w e r o a g a i n present,
A
t acu eais baie. -u oe
committee h a d opportunity o f hearing f r o m t h e experts a n d
from the others present, a n d I am quite sure that some mempers o f the Board h a d some points cleared u p i n their
espect t o which t h e y h a d not been fully inrormed,
and the n e t result was, a s the Chairman has stated, t h a t i t
“was decided t o have t h e bill redrafted,
t o make changes
such a s you have referred to, iirt Chairman, a n d t o make
any changes n e c e s s a r y b e c a u s e
o f t h e developments d u r i n g
the long period which has passed since t h e bill w a s first
considered.
“ I e felt that w e made real progress w i t h the
Federal R e s e r v e B o a r d a n d w e r e l e d t o believe, a l t h o u g h
they did not act upon it, that they would give us support.
The a i r n :
T
h
e present status o f t h e plan i s this,
that the Board desired t o have the bill redrafted, t o make
sure t h a t p r o t e c t i o n w a s a f f o r d e d
points.
O n e was a n objection
o n certain principle
t o the plan being extenddd
so t h a t i t m i g h t b e t a k e n a d v a n t a g e
o f b y member b a n k s .
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Federal Reserve Bank of St. Louis
588
Another w a s t h e l i m i t o f s a l a r y o f a n y oitficer o f t h e
reserve b a n k s t h a t m i g h t p a r t i c i p a t e
bill i s n o w d r a w n i n s u c h a
i n the plan.
T h e
way t h a t t h e d e t e r m i n a t i o n
of
the s c o p e o f t h e p l a n e n t i r e l y r e s t s w i t h t h e Pederal R e serve Board.
I
t d e v e l o p e d a t t h e t i m e t h i s w a s discussed,
as I l a m t o l d b y G o v e r n o r McDougal,
t h a t t h e Rogers Bill,
which i s a bill f o r t h e reorganization o f State Department
Services, p r o v i d e s a
ably m o r e f a v o r a b l e
pension p l a n w h i c h i s v e r y c o n s i d e r t o t h e m e n t h a n i s contemplated u n d e r
our plan, a n d I kmow that that h a d some influence u p o n
the Board. I
talked w i t h i r , M e l l o n a b o u t t h e p l a n a n d
legislation s o m e t i m e a g o a n d p o i n t e d o u t t o h i m t h e m u c h
more s c i e n t i f i c c h a r a c t e r
in t h e F e d e r a l Hmployees!
o f our proposal t h a n i s contained
P e n s i o n P l a n , a n d h e was v o r y
much impressed b y it and 1 think from what h e said that h e
was r a t h e r
i n favor o f g o i n g a h e a d w i t h t h i s p e n s i o n p l a n
for employes
o f the r e s e r v e b a n k s ,
Now, the report which i s before you will only require
action t o a c c e p t a n d a p p r o v e
i t a n d t o request t h e
Federal Reserve B o a r d t o finally express their attitude i n
respect t o the bill submitted a n d the plan submitted,
and a f t e r t h a t h a s b e e n d o n e t h e c o m m i t t e e
c a n b e instructed
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Federal Reserve Bank of St. Louis
3589
with regard t o proceeding toward securin: legislation,
possibly t h e F e d e r a l R o s e r v e B o a r d w i l l u n d e r t a k e
ceei eae e e
or
t o do
‘ h a t i s your pleasure i n the matter?
Governor Young: I
make a motion t o that efrect,
lip. Chairman.
Governor Norris: S e c o n d e d .
(The motion, having been duly seconded, w a s cavried.)
The Chairman:
T h e n e x t topic f o r o u r consideration
American F e d e r a t i o n
Organization
I put that
o r Labor
o f B a n k Clerks.
o n the program for the purpose
o f advising
the Governors that o n the 15th o f Septembcr, a f t e r s o m e
preliminary correspondence a n d discussion, I
received a
call i n Naw York from Mr* Frank tiorrison, Secretary o f the
Federation o f L a b o r a n d :ir. H u g h fpeene:
their organizers,
a n d . r , Bright,
the A s s o c i a t i o n o f S t e n o g r a p h e r s
v h o i s connected w i t h
a n d Rookkeepers,
the f i r s t e f f o r t t o o r g a n i z e t h e c l e r k s
insurance c o m p a n i e s ,
a n d s o on.
Oncor
which is
i n banks, o 1 f i c e s ,
T h e y c a m e t o m y ofirice
to ascertain what o u r attitude would b e with regard t o having t h e clerks i n our bank organized under this Section o f
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Federal Reserve Bank of St. Louis
390
the American Federation o f Labor.
T h e y . incuired specifice
ally whether t h e bank would approve t h e principle o f colbective bargaining,
a s to. Salaries, 2 n d - a o O n .
a good p a r t o f a n a f t e r n o o n together.
me what t h e y stated w a s a
W e spent
T h e y submitted
to
schedule o f the standard princi-
ples a p p l y i n g t o t h e s e matters;
t h a t is, conditions
of
in the bank, conditions o f dismissal, vacations, h o u r s o f
labor a n d s o on. I
ate a n d I
wanted t o b e f r i e n d l y a n d consider-~
went o v e r i t w i t h t h e m a n d i t developed
course o f t h e d i s c u s s i o n t h a t t h e r e w a s n o t a
i n the
point
in
Poa
n
o
t
covered b y the
was
n
o
t
only
their specifications t h a t
=
oractice
i n t h e P e d e r a l R e s e r v e B a n k o f N e w York,
than covered;
e
t a t o ie p e i
b u t more
o f T a c t we~ s h o u l d l i t e r -
allyD adopt t h e program which they submitted t o u s a s t o
standard s c a l e o r treatment
o f o u r clerks t h a t t h e y vouid
be w o r s e o f f t h a n t h e y a r e today.
T h e o n e e x c e p t i o n t o it,
of course, w a s whether through t h e instrumentality o f
organization a n d collective. bargaining they might succeed
their salaries increased.
T h e y were v e r y i n -
sistent u p o n that point o f collective bargaining.
took them all through o u r n e w building a n d w e were partly
occupying i t then--- a n d arter w e g o t through lr. vorrison
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Federal Reserve Bank of St. Louis
391
i @m-fPank to, sey that<there isn") 2 thing
that w e could suggest w i t h regard t o conditions under
which your clerks will w o r k i n t h e building."
very c o m p l i n e n t a r y
about t h e arrangement
T h e y were
f o r feeding
the
clerks, ventilation, t h e medical dopartment, hospital a n d s o
On, a n d w h e n w e r e t u r n e d
t o t h o b a n k t h e y a s k e d m e specific-
ally w h a t m y a t t i t u d e w a s w i t h r e g a r d t o o r g a n i z i n g a n d
collective bargaining.
positively o p p o s e d
E . t o l d t h e m that: 1
t o it;
was déerinitely
t h a t i t would b e a
disadvant-
to our clerks, a n d would just introduce a n element o f
discord;
t h a t they were pretty happy i n the bank a n d well
treated, a n d I did n o t want a n y such steps t o b e inbroduced.
After I
October, I
left N e w York, t h a t i s t o say, sometime i r
received f r o m t h e b a n k s o m e c l i p p i n g s f r o m t h e
New Y o r k newspapers,
i n which I
was a u o t e d b y M r B a u m ,
who h a d not attended t h e meeting, although I
respondence w i t h him,
Now, I
had some cor-
a s favoring collective bargaining.
did n o t want ¢ « o f you t o misunderstand what
my attitude was, I did not want t o have any mistake i n
memory arise,
s o immediately after this meeting I dictated
a brief memorandum o f just what I
did s a y t o them, a n d I
would like to read it to you, t o show you what respect for
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Federal Reserve Bank of St. Louis
veracity t h i s m a n B a u m h a s ;
done c o l e w i
t i r s . Horrison,
Frayne
and Bright o f the Amsrican Federation o f Labor, a n d then
took them all through o u t n e w building.
T h e y agreed
thet w e made t h e best s h o w i n g o f a n y institution t h e y
knew
o f i n conditions o f work.
of a n a d v e r s e c h a r a c t e r
T h e y had n o comments
t o make.
convince ‘
u
s o f t h e soundness
T h e i r idea was t o
o f t h e Drisica pie; OL
organization a n d collective bargaining. I
that a s a t p r e s e n t a d v i s e d ,
to i t , a n d i t w a s n o t a
decide, anyway.
o u r institution w a s opposed
matter w h i c h I
was a u t h o r i z e d
W h e n w e are a l l moved into
a n d thoroughly orgenized,
and I
get
back f r o m t h e West, t h e y s a i d t h e y m i g h t c o m e i n a n d
have a
further c h a t . M e s n t i m e , I
going t o have a
to
I t was finally decided that there i s
nothing t o b e done j u s t now.
our n e w b u i l d i n g
told t h e m
gather t h a t t h e y a r e
talk with other bank presidents.
September 16, 1924."
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Federal Reserve Bank of St. Louis
593
In the course o f the discussion t h e y admitted, a l though
i t is not
i n this memorandum,
t h a t under
t h e condi-
tions o f labor that prevail i n fed«ral reserve banks, where
people
a r e highly specialized
a n d where salaries
a r e graded,
and s o on, i f any demand f o r increased p a y was made i t
would b e entirely o f domestic origin i n the organization
and b e handled b y the clerks themselves; t h a t i t should not
be handled b y what might b e called a strike organized o f
the A m e r i c a n F e d e r a t i o n
o f Labor f r o m outside.
I speak o f this b e a a u s e
i t was disclosed
a t that dis-
cussion, a n d this i s what’I want t o get at, t h a t there i s
underway a
tions
very c o m p r e h e n s i v e p l a n t o e f f e c t l a b o r o r g a n i z a -
i n large o f f i c e s t h a t e m p l o y l a r g e n u m b e r s
like banks, i n s u r a n c é companies,
a n d s o forth.
o f clerks,
I
t cannot
be Gonsé; a s ty. Merrison said, o v e r nignts 4t-ceannot b e
a matter except o f slow growth, b u t t h e American Femeration
of Labor h a s undertaken t o carry onthis program,
m d he
stated that i n time h e believed t h e y would succeed. &
would like t o a s k whether a n y other banks h a v e b e e n approached. with Pecerd-to-1t,
Governor MeKinney:
w e have not.
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Federal Reserve Bank of St. Louis
Governor “Veli
p o r n s
Governor Fancher:
w e have not.
T h e r e w a s a n ef-
fort about f o u r years a g o t o effect s o m e organization i n
Gleveland;
o n e m é é t i n g w a s held,
Governor S e a y :
some a c c o u n t s
b u t n o t h i n g c a m e o f it.
Y o u maye h a v e observed
o f interviscws w i t h s e v e r a l
i n t h e papers
o f the large trust
companies a n d bankers w i t h reference t o representations
made b y these same organizers, w h i c h were afterwards denied
by b o t h i n s t i t u t i o n s m e n t i o n e d ,
Governor Wellborn:
M r , Chairman, I
want t o b r i n g u p
a matter w h i c h h a s to: d e w i t h corpespondenec- -
received:
in
New York with reference t o a Federal reserve bank registering. commercial papers.
other G o v e r n o r s
T h i s correspondence wrote t e the
a t t h e s a m e time,
would h a v e t o b e decided
at a
and I
told h i m t h a t i t
Governors! C o n f e r e n c e . I
have
no desire t o bring i t before t h e Governors formally, b e cause I
haven't studied t h e question thoroughly a t all.
I a m not prepared
t o advocate
Governor Seay:
i t o r t o oppose i t .
O n e enterprising egency undertook
‘to publish, o v e r fac. s i m i l e s i g n a t u r e s ,
t h e replies o f s e v -
eral governors.
Governor Wellborns:
I
t was a
private l e t t e r anyway.
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Federal Reserve Bank of St. Louis
i never regarded i t as a public Letter,
The Chairman:
T h e r e T s n o t h i n g isi t .
ago, w h e n I was i n the Bankers! T r u s t Vompany t h e International paper company a n d some other concerns which I knew
about were selling v e r y large amounts
o f pay T h e r e w a s
a good deal o f feeling developed a t one time because o f
some forged paper which g o t into t h e market, purporting t o
be the notes o f borrowing concerns, a n d w e made a
very cox-
haustive study o f the whole thing i n the B:mkers! Trust
Company a n d f i n a l l y m a d e a n a r r a n g e m e n t w i t h t h e International P a p e r C o m p a n y b y w h i c h w e d i d r e g i s t e r t h e i r paper.
Then w e t r i e d t o e x t e n d i t t o m a n y o t h e r concerns,
a matter
o f f a c t i t d i d n o t w o r k v e r y well;
pear t o b e s u p p l y i n g a
domard f
o a n y kind,
but as
i t d i d n o t apa n d i t just
petered out.
Governor Harding:
I t i s a very improper function
for a Fedral Reserve Bank t o exercise, because i f we were
to d o t h a t t h e i m p r e s s i o n v o u l d g e t o u t t h a t w e w e r e
standing r e s p o n s i b l e f o r t h a t business.
Governor “vellborn:
T h e day I
arrived h e r e a
young
lady correspondent o f the Universal News Service came t o
see m e a n d a s k e d m e i f w e h a d t a k e n a n y a c t i o n o n t h e m a t ~
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Federal Reserve Bank of St. Louis
396
ter. I
told h e r s h e w o u l d h a v e t o s e e t h e C h a i r m a n o f
Chis <-Gionterence a t t i e G h e e 04, bie COmMnerenCe.
t O SBeClige
information,
The Chairman:
T h e next topic f o r discussion i s
4-(c)-1 R e p o r t
Governor M c e D o u g a l :
approved
tions
o f L e a s e d W i r e Committee.
T h e report w h i c h was submitted
a t the last conference
o n t h e c l a s s o f business
recomended
and
certain restric-
t o b e s e n t o v e r l e a s e d wires.
These r e c o r m e n d a t i o n s w e r e i n c l u d e d
i n the revised leased
wire regulations s e n t out under Federal Reserve Board's
letter X-4099.
The n u m b e r o f messages h a n d l e d o v e r t h e m a i n l i n e o f
the leased wire system shows a
considerable reduction w h e n
compared w i t h t h e n u m b e r s e n t o v e r t h e w i r e s a
While a
year ago.
part o f this falling o f f has b e e n due t o
pusiness conditiom,
i t i s largely t h e result o f the leased
wire r e g u l a t i o n s w h i c h w e r e m a d e e f f e c t i v e J u l y 1 5 , 1 9 2 4 .
The decrease i n vohume o f messages h a s permitted a
reduction
i n the number
o f circuits, m a k i n g a
the s y s t e m i n w i r e r e n t a l s
annum,
o f approximately $21,800 p e r
a n d i n operators s a l a r i e s
per annum.
saving f o r
o f a p p r o x i m a t e l y B 2 2 ,000
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Federal Reserve Bank of St. Louis
a 4
All o f this saving i s not yet shown i n the monthly r e ports,
a s some o f
s s e c h a n g e s w e r e m a d e i n September.
However, m o s t o f i* s h o u l d b e reflected i n the October r e port.
T h e saving t o t h e individual banks will n o t b e a s
great a s those figures indicate, d u e t o the fact that t h e
Treasury Department, w h i c h pays i n accordance w i t h the use
of the wires, b a s e d o n the volume o f business handled i n
the p r e c e d i n g year,
i s n o w p a y i n g 535,000 p e r m o n t h l e s s
tien -prior L e - J o l y 1 , 1 9 2 4 .
The r e d u c t i o n
i n the number
o f circuits h a s b e e n m a d e
without causing a n y delay i n the handling o f messages,
the s e r v i c e
a t p r e s e n t b e i n g v e r y satisfactory.
Governor Seay: I
move that t h e report b e received
and approved.
Governor Young:
Seconded.
(The motion, having been duly seconded, w a s carried.)
Governor M c K i n n
I
wire c o m m i t t e e ' s r e p o r t , I
n connection
with t h e leased
want t o c a l l t h e a t t e n t i o n o f
‘the Conference t o one matter t h a t has come u p i n connection
with o u r operations, a n d that i s that during certain seasone o f t h e y e a r w e d i s c o u n t q u i t e a
number o f bills o f
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Federal Reserve Bank of St. Louis
398
lading, s i g h t c e m a n d drafts, w h i c h a r e p a y a b l e f o r t h e
most p a r t i n other districts. :
s e n d those items c u t
to t h e Pederal r e s e r v e b a n k o r b r a n c h w h e r e t h e y a r e p a y able a n d t h e o t h e r F e c e r a l r e s e r v e b a n k s h a v e b e e n t r e s t ing t h e m a s c o l l e c t i o n s a n d h a v e r e p o r t e d p a y m e n t
over t h e c o m m e r c i a l w i r e s ,
t o us
“ w e pledge t h e s e items w i t h
the agent a n d i t i s very important that w e should g e t advice o f p a y m e n t
o n t h e d a t e o f payment f o r purposes
o f com-~
puting interest against t h e member b a n k which discounts
them with us.
W w e feel that items o f that character
should b e distinguished f r o m other collection items, a n d
that w e are entitled t o the leased wire service i n getting r e p o r t o f payment.
The Chairman:
Y o u g e t prompt advice
Governor HMoewinney:
proposition
e n d l
w a n t t o submit
eau
t o t h e Conference,
The Chairman: I
mest.
V e s :
o f payment?
think that i s a very reasonable r e -
A r e we the fellows who offend?
Governor :i¢cKi
W e l l , . y o u have.
The Chairman: A
Governor HicKinney:
about.
number
W
o r t h o s e h a v e c o m e t o us.
e haven't f a l l e n o u t w i t h y o u
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Federal Reserve Bank of St. Louis
3SO8
The Chairman:
W i l d the pe"setiseraciory t o v o r t e
Mp. Harrison makes a
note o f this a n d sees that i t i s cor-
rected?
Governor MeKinney: I
think probably action b y the
conference w o u l d b e desirable.
The Chairman:
Y o u r motion i s that w e give leased
wire advice o f payment o f these bills o f lading drafts,
that h a v e b e e n d i s c o u n t e d ?
Governor McKinney: I
would g o further t h a n that a n d
provide t h a t t h e sending Federal Reserve B a n k put some sort
of notification o r stamp onthe remittance letter.
The Chairman:
P u t 2
Governor licKinney:
arson
Y e s , w h i c h clearly indicates t h a t
the b i l l h a s b e e n p u r c h a s e d
b y the Federal Reserve b a n k
and i s a part o f its o v n assets. I
quaint
t h e collecting
Governor Harding:
e e
think w e ought t o ac-
b a n k with o u r relation
t o t h e paper.
T h a t lets the slip set forth the
fact t h a t y o u h a v e d i s c o u n t e d
i t a n d request l e a s e d w i r e
advice.
Governor iicDougal: I
a m ghad t o have this matter
brought up. T h i s conference i n the pasthas seen fit to
appoint t h e Chicago b a n k a s a kind o f custodian a n d overseer
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Federal Reserve Bank of St. Louis
400
Of t h e o p e r a t i o n o f t h i s beased- w i r e s y s t e m f r o m a
trai standpoint.
That c o m m i t t e e
and myself.
T h e Conference appointed a
i s still
ccn-
committee.
i n existence, G o v e r n o r F a n c h e r
G o v e r n o r McKinney brought this matter up,
and 1 might s a y i t i s not unusual f o r the question t o b e
brought
u p t o t h e leased wire committee
a s t o whether
or
not c e r t a i n t r a n s a c t i o n s w o u l d b e w i t h i n t h e s c o p e o f t h e
leased w i r e regulations.
~ w e @ considered t h e matter.
question i n v o l v e d drafts, b i l l o f l a d i n g d r a f t s o f a
T h e
char-
acter which innumerable numbers a r e handled i n every financial c e n t e r a n d w e c o n s i d e r e d t h e m a t t e r a n d f e l t t h a t
without a
change
doubtful w h e t h e r
i n the leased Wire repuiations
i t was
w e c o u l d p e r m i t t h e u s e o f t h e wires f o r
that purpose,
Governor Me.inney:
T h a t i s y o u felt that a s a com-
mittee?
Governor McDougal:
A s a committee, yes.
fectly right that i t should b e brought u p here.
sideration w a s based upon, I
think, N o . 6
L i s .
pee
T h e con-
o r 7 of the
leased wire regulations, t h a t t h e leased wires shall n o t
be used f o r tracing o r advising payment o r non-payment o f
non-cash c o l l e c t i o n items.
T h a t i s w h e r e t h e t h i n g hinges.
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Federal Reserve Bank of St. Louis
401
a
I amperfectly
satisfied
t o have
i t brought
u p here,
and I
want this body t o understand that i f w e followed t h e practies t h a t 1
think t s i n d u l s e d i n , t h a t 2 2 w e a l d f o l t o w e d
the practice that I
think i s indulged i n b y Dallas a n d han-
died that class o f paver frecly i n that way, t h e leased wire
system would not b e great cnough t o carry t h e burden.
‘what I
want i s a
decision
o n the m e s t i o n
o f whether t h e
leased wire regulations will permit u s t o carry that class
of business.
W e are perfectly willing t o d o i t i f the
Conference says that w e should.
Governor Harding:
item, b u t i s a
t i s moet 4. mon-—cash c o l l e c t i o n
discounted i t e m .
Governor HcDougals:
are n o t d i f f e r e n t
dreds
T
T h e s e a r e d i s c o u n t e d drafts, t h a t
f r o m other drafts
t h a t a r e drawn,
hun-
o f w h i c h a r e d r a w n e v e r y d a y i n Chicago a g a i n s t
shipments o f grain, b o t h a t t h e Seaboard,
in N e w York, P e n n s y l v a n i a ,
Governor Harding:
a n d points
t o interior pofiits
i n t h e South.
B u t s u p p o s e y o u were operating a
commercial b a n k ?
Governor HceDougal: I
bank a n d I
have o p e r a t e d a
have h a n d l e d t h o u s a n d s
Governor Harding:
commercial
o f t h e s e items.
Y o u keep t h e discounting department
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Federal Reserve Bank of St. Louis
402
and t h e c o l l e c t i o n d e p a r t m e n t separate.
I f you have
drafts t h a t come strictly within t h e collection class y o u
would sent t h e m out a s collection items, b u t i f
stuff discounted y o u would n o t call i t a collection item.
Governor McDougal:
is paid.
I t i s not a
The Chairman:
Tection. 1 pem,
i
s a collection i t e m until i t
tank item.
A n y discounted p i e c e o f paper i s a
col-
T h e qiestion i s this, t h a t i n one instance,
where y o u are
simply a n agent o f the bank, coll«cting i t and turning over
the proceeds w h e n y o u g e t i t ;
i n this instance t h e t m n k
has discounted i t , a n d i t i s collected f o r its o w n reimbursement,
a n d i t wants t d e g r a p h i c a d v i c e
sible method.
b y t h e prmptest p o s -
A s a Wattcr o f fact i t i s unusual f o r u s t o
ask f o r t e l e g r a p h i c a d v i c e
have b e e n discounted,
i n connection w i t h items t h a t
b u t t h i s i s o n e exception.
Governor ckKinney:
T h e peculiar nature o f the i
requires t e l e g r a p h i c a d v i c e .
Governor sicDougal: I
a m not opposed t o it, b u t I
doubt whether t h e regulations will permit carrying t h e
items, I
a m n o t i n doubt a s t o whether t h e present s y s t e m
as s e t u p w i l l c a r r y t h e l o a d i f w e d e a l i n t h e m g e n e r a l l y
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Federal Reserve Bank of St. Louis
403
because t h e first thing y o u k n o w they will b e drawing drafts
against h a l f a
carload o f potatoes a n d things
o f that
kind.
Governor McKinney:
T h a t i s perishable s t u f f a n d t h e
bank w o u l d n o t d i s c o u n t i t . I
possible
want t o k n o w w h e t h e r
o r not
t o a m e n d t h e ré,ulations h e r e t o cover i t ?
The Chairman:
Certainly.
Governor jicKinney:
P e n
0
L Ler eeb- n > tneenomnt o F a n
amendment t o t h e regulations.
The C h a i r m a n :
G o v e r n o r HeKinney moves that upon
those bill o f lading drarts w h i c h have b e e n discounted b y
a’Tederal r e s e r v e b a n k a n d w h i c h b e a r o n t h e a d v i c e o f col-
lection evidence o f that fact, t h a t advice o f payment b e
given over the leased vires b y the collecting Federal reserve bank, a n d that t h e regulations governing t h e use o f
thes: w i r e s
b e amended
Governor ‘jellborn:
Governor Seay:
s o t h a t t h a t b e m a d e possible.
T t wild s e c o n d t h a t motion.
W o u l d i t not meet t h e situation i f
this conrerence v e r e t o pass a
vote t o t h e effect t h a t
such drafts, w h e n discounted b y a FederalReserve Bank, d o
not c o m e w i t h i n t h e d e f i n i t i o n
Governor iicDougal:
o f non-cash collection i t e ms?
T h a t w a s stated v e r y well.
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Federal Reserve Bank of St. Louis
404
Governor S e a y :
dvatt- o r a t t a c h e d
4 n d that proper notation o n the
t o t h e draft, w h i c h w i l l e n a b l e t h e c o i ~
lecting F e d é r a l r e s e r v e b a n k t o d e t e r m i n e t h a t i t i s a
counted p a p e r o f a
Pederal
a
n
s
dis-
w i l l surfiee
be - s n o w t o a s t
The Chairman: I
or this r e s o l u t i o n
sue-est t h a t w e l e a v e t h e d r a f t i n g
t o t h e Secretary.
H
e has g o t t h e
sense o r it, a n d h e will+ accomplish t h e object - t h a t
Governor c K i n n e y desires a n d which w e ail understand.
Governor icDougal: I
would like t o hear f r o m Gover-
nor Fancher, t h e o t h e r m e m b e r o f t h e c o m m i t t e e w i t h r e g a r d
to this matter, because H e probably b a s some ideas o n it.
Governor Fancher:
*}
2
3
( e s . c o o u U r e land 1° conrerréd wwhien
Sinney m a d e t h i s i n a u i r y
o f t h e committee. I
Governor -‘cDougal t h a t there w a s a
of q u e s t i o n w h e t h o r t h e p r e s e n t r e g u l a t i o n s ,
good deal
a s adopted
and: Sent. o U t by-the- hoard, w o u l d p e r m i t o f i¢.
Then,
looking t o the actual operation, assuming t h a t i t might b e
permitted, t h e r e c a m e t h e a u e s t i o n o f t h e v o l u m e a n d t h e
further q u e s t i o n o f whether t h e s e i t e m s c o u l d b e p r o p e r l y
distinguished “ h e n they came f r o m collection departments
of Federal r e s e r v e b a n k s a n d w h e t h e r t h e w i r e s w o u l d s t a n d
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Federal Reserve Bank of St. Louis
405
ay
tre Voac. I
haven't a n y k n o w l e d g e o f h o w g r e a t t h e v o l -
ume i s , b u t i f t h e s e d r a f t s a r e c l e a r l y d i s t i n g u i s h e d
so
that t h e collecting b a n k knows t h a t particular crafts h a v e
been d i s c o u n t e d
b y the Federal r e s e
b a n ]
reason w h y t h e wires might n o t b e u s
carry them.
i
s e e
no
f l e wires will
f e c l v e r y strongly t h a t proper c a r e
be t a k e n t h a t t h e c o l l e c t i n g b a n k w o u l d k n o w t h a t t h e s e
drafts have b e e n discounted b y some other Federal reserve
bank a n d t h a t
v e d o n o t g o t a c k t o our former practice
o f
advising p a y m e n t o f r u n
Governor :iciinney:
i g $ 6 =the volume,
very large yet, b u t the facility,
very i m p o r t a n t o n e t o t h e b a n k s
with r e f e r e n c e
course
o f time
t o t h e movement
s h o u l d
1 t 2 5 net
i n m y judgment,
is a
i n t h e south, p a r t i c u l a r l y
o f cotton,
b e developed
I f i n the
t h a t t h e volume
has
an
grown s o great a s t o preve unsatisfactory feature o f t h e
leased w i r e operations,
w e c o u l d t h e n g i v e itt further
consideration.
The Chairman:
Y o u h a v e h e a r d t h e motion, g e n t l e m e n .
is t h e p l e a s u r e
o f t h e vonference?
GoVernoOr V e l p o r n s I
wish t o s e c o n d that, b e c a u s e
we a r e i n t h e s a m e f i x a s t h e D a l l a s B a n k .
W
e discount
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Federal Reserve Bank of St. Louis
406
thase drafts. =
have n o i d e a w h a t t h e v o l u m e o f t h e
business i s .
Governor ifcDougal: L
woulc
that t h e leased w i r e regulations,
K S n
a
a s »ritten,
sugeestion
b e interpret-
ed t o i n c l u d e t h e r i g h t t o t e l e g r a p h i c a d v i c e o f payment
or d r a f t s
o f t h e class described,
The Chairman:
R
S GadsS gos
s e e s oetaie. INO e r t e l e m y
OrleCRed.
(The motion, having b e d u l y seconced, w a s carried.)
The: Chairman:
T h e
x t topic
o n t h e program f o r con-
sideration i s 4+(c)-3
4-{c)-3
Reconcilement
o s provisions
o f
Telegraphic T r a n s f e r c i r c u l a r s
of F . % . B a n k s w i t h r e c o m m e n d a tions e m b o d i e d
X-4099.,
It i s r e c o m m e n d e d
instructed
i n Board's
letter
t h a t t h e L e a s e d ‘/ire C o m m i t t e e
t o review t h e telegraohic
of t h e F e d e r a l R e s e r v e B a n k s ,
h e
transfer circulars
a n d require reconcilement
of t h e p r o v i s i o n s t h e r e i n w i t h t h e committ: e's r e c o m m e n d a tion e m b o d i e d
i n the Fcderal
R e s e r v e B o a r d ' s letter X - 4 0 9 9 ,
That w a s p u t o n t h e p r o g r a m b y S t + L o u i s a n d S a n Francisco.
Governor B i g g s :
T h e . O n L y POlmy.
there i s i n regard t o No. 4
W a n k vO. O r i e o u s
i n the Board's letter.
I n ad-
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Federal Reserve Bank of St. Louis
407
dition
t o using t h e usual mail advice
f r o m member banks
receiving c a s h o r telegraphic transfers o f funds, immediate
telegraph o r o t h e r w i s e s h o u l d b e g i v e n b y t h e
Federal R e s e r v e B o a r d r e c c i v i n g t h e transfer, e x c e p t
in
case w h e r e t h e c r e d i t e d m e m b e r b a n k s h a v e s t a t e d t h a t
other t h a n t h e u s u a l m a i l a d v i c e i s unnecessary.
The Chairman:
T h a t i s just a
reconciliation
o f the
P e p i i a t l.
n
o
Governor Biggs:
analysis
were
e p l y i n g t o that letter w e made a n
o f the transfer records a n d found t h a t i f w e
t o comply literally
paragra h
w i t h t h e provisions
o f that
it would m e a n sending four o r five hundred addi-
tional telegrams c a c h month, t h e expense o f which would
either b e borne b y the Federal Reserve Banks o r the member
banks,
a n d i f b y the member banks without authorization
On=TheLr p a r t ,
I
n issuing t h e revised circular regarding
telegraphic transfers being erfective o n the 15th o f the
month, I purposely omitted this matter, because i t was
simply a n expense, a n d i f w e followed i t literally i t
would mean 500 more telegrams a month over the leased wire,
which w e thought w a s unnecessary.
Governor C a l k i n s :
T h e reason that this
i s submitted
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Federal Reserve Bank of St. Louis
408
is t h a t t h e F e d e r a l R e s e r v e
Bank
o f Richmond declines
to a f f o r d t h e m e m b e r h a n k s o f o t h e r d i s t r i c t s t h e s a m e
privileges r e g a r d i n g
i f i c a t i o n b y wire b y Richmond
at
Richmond's c o s t o n télegraphic transfers received f r o m
other d i s t r i c t s f o r a c c o u n t
o f member b a n k s w i t h i n R i c h -
mend d i s tricet.,
The Chairman: I
would s u g g e s t a
motion t h a t t h e
circular concerning operations o f the leased wires i n
this p a r t i c u l a r
b e m a d e t o c o n f o r m t o t h e Committee's
recommendation, w h i c h i s embodied i n the Federal Reserve
Board's letter X-4099, paragraph 4 .
Governor Seay:
the m a t t e r
A s a substitute r o r that I
b e referred
t o t h e standing Committee
tions a n d t h a t t h e C o m m i t t e e
b e instructed
move that
o n Collec-
t o report
on
telegraphic transfers.
The C h a i r m a n s
X-4099
is a
Inserted
letter s e n t o u t b y t h e F e d e r a l R e s e r v e B o a r d
on r e c o r m e n d a t i o n
understand i t , G
o f t h e L e a s e d w i r e Committee,
Governor Biggs:
have
a s
overnor McDougal.
Governor McDougal:
eeu. I
i n the circular letter
Y e s .
Yes.
i t here,
T h a t letter i s dated J u n e
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Federal Reserve Bank of St. Louis
409
Governor Seay: 3 e f o r e . d e f i n i t e a c t i o n i s t a k e n 1
ion o f t h e R i c h m o n d Bank.
circular u p o n t e l e g r a p h i c t r a n s f e r s
leesed wire services i n erfect,
the p u r p o s e s
i n our opinion, c a r r y
o f t h e Board's circular.
from t e n t o f i f t e e n t h o u s a n d d o l l a r s a
with p e r f e c t s a t i s f a c t i o n
I
year,
t saves
us
i s working
t o o u r member banks,
W
e d o not
give telegraphic advice unless t h e desire i s expressed t o
receive tclegravhic advice.
al hundred a
“ 1 ¢ should have t o make sever-
day a n d w e d o not rind i t necessary.
O u r
member b a n k s d o n o t s e e m t o d e s i r e i t . T h e r e i s p e r f e c t
harmony
i n our district w i t h respect
t o o u r present peac-
tice, although : e recognize t h a t technically i t varies
slightly f r o m t h e w o r d i n g
The Chairman:
amended
o f t h e circular,
T h e s e gentlemen w i s h t h e practice
s o a s t o have
i t conform apparently
t o what y o u are
now doing.
Governor Calkins: I
The Chairman: I
Governor B i g g s :
d o not.
believe G o v e r n o r B i g g s d o e s .
O u r idea was simply t o save t h e ex-
pense of 500 telegrams a month.
The Chairman:
G o v e r n o r Calkins, w h a t s u g g e s t i o n h a v e
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Federal Reserve Bank of St. Louis
you t o orfer o n this topic?
Governor Calisins
A e s
s u cS .FLOM.
O
S h e
A a a cae
Federal reserve banks conrorm t o o n e practice, a n d that
is t h e practice s e t u p b y the Federal Reserve Board.
I f
the F e d e r a l r e s e r v e b o a r d ' s i n s t r u c t i o n s a r e t o b e changed,
that r a i s e s a
V e g a y Wel Olds
provision t h a t i n a d d i t i o n
i
n X-4099
t o t h e usual
member b a n k s r e c e i v i n g c r e d i t
there
i s the
m i l advice t h e
f o r telegraphic
transfer
o f
funds immediate advice b y telegraph o r otherwise should
be g i v e n b y t h e F e d e r a l R e s e r v e B a n k r e c e i v i n g t r a n s f e r
except
i n casé a
bank stated t h a t i t d i d n o t want i t ,
That i s diametrically opposed t o the practice that’ Governor
Seay h a s d e s c r i b e d
The Chairman:
i n his bank.
Y o u w a n t t h a t rcoversed s o t h a t y o u
not m a k e a d v i c e
b y telegraph unless reauested
t o do
Ps-theat v a s p o i n t ?
Governor Calkins:
M y opinion £
p r o v i s i o n
is correct a n d s a t i s f a c t o r y :
.
a
s it is, b u t i f i t i s t o b e
resersed i t should b e reversed b y all o f
a n d not b y one
or two. o f us.
Governor Seay:
one, involving a
A s the matter i s quite a n important
very large s u m o f money t o the system, I
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Federal Reserve Bank of St. Louis
would like t o read this memorandum:
"Under practices existing prior t o July 15, 1924,
all kinds o f telegraphic transfers w e r e made over t h e
leased wires, a n d i t i s apparent t o a n y one that i n connection w i t h c e r t a i n transfers, p a r t i c u l a r l y t h o s e f o r o d d
amounts a n d t h o s e
i n w h i c h t h i r d p a r t i e s a r e involved,
i t
was essential t h a t telegraphic advice o f credit b e given
to the banks receiving credit. H o w e v e r , u n d e r t h e n e w
practices, transficrs a r e made o v e r leased wires o n l y i n
multiples o f $100.00 and consist o f bank balances, a n d
such transfers a r e n o t s u b j e c t
t o t h e same elements
of
dangcr i n case telegravhic advice o f credit i s not given
when i t i s expected,
yen
w e were giving telegraphic advices
o n all trans-
fers, o u r experience w a s that i n a great mamority o f cases
they w e r e n o t n e e d e d
o r desired
imposing u p o n ourselves a
unnecessary
a n d consequently
w e were
large i t e m o f expense which was
a n d not justified.
v
t
e found
i t necessary
t o
send from fifty t o seventy-five s u c h telegrams e a c h d a y
at a cost o f atout $1.00 each, resulting i n - a faltly expen-
diture o f from $50,00 t o $75.00,
A t $50.00 a day this
cost w a s m o r e t h a n $ 1 5 , 0 0 9 a n n u a l l y .
S i n c e w e changed t
he
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Federal Reserve Bank of St. Louis
412
practice o n July 15th, w e have h a d n o complaint whatever
on t h e p a r t o f o u r m e m b e r b a n k s a n d n o s i n g l e c a s e h a s c o m e
to o u r a t t e n t i o n
ViCe- O f Creal,
i n which a
bank expected
t o receive a d -
a n d f a l l e d t o do-s0.
"Taking a l l o f t h e s e c i r c u m s t a n c e s i n t o considera-~
tion, t h e r e f o r e ,
ranted,
w e f e c l t h a t o u r p r e s e n t p o l i c y i s war-
a n d w e d o not feel that w e a r e called u p o n t o
change o u r p r a c t i c e
i n this r e s p e c t u n d e r t h e r e g u l a t i o n s
or as the result o f experience."
The Chairman: I
gather there i s n o objection raised
to c h a n g i n g t h e p h r a s e o l o g y
letter X-4099,
o f t h e regulation,
o r the
t o accomplish t h e purpose which Governor
Seay e x p r e s s e d a n d w h i c h G o v e r n o r B i g g s h a s expressed,
that i s t o s a y t h a t n o t e l e g r a p h i c a d v i c e o f payment b e
made u n l e s s
i t i s requested,
Governor Fancher:
W
e have t h e provision
i n our
circular b y which when necessary w e send a wire advising
a momber b a n k o r credit, c o l l e c t o v e r t h e c o m m e r c i a l wire.
The Chairman:
the c i r c u l a r s
T h i s will also involve a
in
o f s o m e o f t h e r e s e r v e banks.
Governor McDougal:
Mr. C h a i r m a n .
change
T h e c i r c u l a r s a r e n o t uniforn,
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Federal Reserve Bank of St. Louis
The Chairman:
B u t i t will i n v o l v e a
Governor HeDougal: I
making t h o s e c h a n g e s
Chicago,
over a
change.
think w e c a n handle i t without
b y ascertaining,
a s w e have done i n
considerable p e r i o d o f time, t h o s e b a n k s
that a r e i n the m b i t o f sending transfers,
whether t h e y want t h e wire advice.
a n f i n d out
I n our case w e have
a great m a n y b a n k s t h a t h a v e s a i d t h a t i t w o u l d n o t b e
necessary,
a n d b y working
great s a v i n g . I
that plan
i t would
think
w e have effected a
b e unnecessary
a n d inad-
visable t o imoose u p o n the banks a s a whole t h e w cessity
of literally adhering t o a plan under which all transfers
were t o b e i m m e d i a t e l y a d v i s e d o f b y w i r e i f necessary.
The Chairman:
T h e r e seems t o b e n o disagreement
except possibly b y Governor Calkins.
Governor Calkins:
T h e r e i s n o disagreement
o n the
part o f Governor Calkins, b u t there i s a very marked
disagreement
b y those w h o a r e u s i n g a
practice e x a c t l y
contrary t o t h a t s e t u p i n t h e circular.
(Further discussion followed.)
Governor Harding: I
the table,
move t h a t w e l a y t h e t o p i c o n
t r e Chairman.
Governor Norris: I
The Chairman:
second t h e motion.
P h e motion i s that t h e topic
b e laid
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Federal Reserve Bank of St. Louis
on t h e t a b l e .
(The motion, having been duly seconded, was carried.)
GOVERROT HGkKimne y s N o w , w a y I
address t h e C h a i r
on this s u b j e c t .
The Chairman: C e r t a i n l y .
Governor iMekKinney:
i
t i s m y understanding, p a r a t i -
cularly after taiking t o Governor McDougal, t h a t a s t o the
leased w i r e s t e t w e e n t h e h e a d o f f i c e s a n d branches
i n a
district t h a t w e have complete liberty o f action i n facilitating t r a n s a c t i o n s t e t w e e n m e m b e r b a n k s w i t h i n a n y d i s trict w i t h e a c h o t h e r a n d w i t h t h e h e a d office.
The Chairman:
T h a t i s p u r e l y a n autonomous m a t t e r .
Governor McDougal:
told G o v e r n o r McKinney,
and t h e b r a n c h e s ,
that
T h e situation i s this, a s I have
t h a t a s b e t w e e n t h e parent b a n k
i s nothing that concerns
u s with
regard t o l e a s e d wires.
Governor i e K i n n e y :
understanding
j
u
s
t vanted
t o have a
definite
o n that,
The Chairman:
T h e next topic i s 4-(d), suggested b y
New York.
4=-D. C o s t o f securing reports o f
examination
It i s recommended,
o f national banks.
T h a t t h e principle ultimately
to
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Federal Reserve Bank of St. Louis
415
apply s h a l l b e t h a t t h e R e s e r v e b a n k s p a y n o m o r e t h a n
the e x p e n s e o f p r e p a r a t i o n
o f t h e reports;
and
Recommended further, T h a t t h e conference adopt a
resolution specifying the time for which the rate of $10
a report shall b e continued, a n d fizing t h e rates which
should
b e paid permanently
f o r reports thereafter.
I a m a f r a i d i t will b e n e c e s s a r y f o r m e t o r e v i e w
very b r i e f l y t h e h i s t o r y o f t h i s m a t t e r
securing r e p o r t s
o f the cost o f
o f e x a m i n a t i o n o f national b a n k s .
D u e to
some unavoidable d e l a y i n dealing w i t h this matter, a f t e r
it came u p at a conserence where I was not present, I
learned w h e n I
came
t o discuss
t h e matter
w i t h t h e Compthol-
er o f the Currency that h e felt a t that time that every
bank had assented t o the proposal a t $10 a report t o be
paid for the reports o f examination, w i t h the exception
se e S Federal Reserve Bank o f New York.
T h e report o f
the d i s c u s s i o n b e t w e e n t h e G o n f e r e n c e a n d C o m p t r o l l e r w a s
made t o m e very largely b y him, a n d after considerable
correspondence w i t h h i m a n d a
number
and s o m e d i s c u s s i o n w i t h t h e Board, I
o f meétings w i t h h i m
recorreended t o o u r
directors t h a t w e discontinue taking t h e reports.
directors, I
B u t our
think acting under the advice, o r inspired
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Federal Reserve Bank of St. Louis
416
somewhat b y the urgency o f some o f the officers :whe
ing
dealt with these reports, feel/that with the other eleven
banks having agreed t o p a y f o r them,
i t would p u t u s i n a
rather difficult position, a n d that w e should for t h e present a g r e e t o m a k e p a y m e n t u n d e r protest,
from. our directors.
u p o n instructions
T h a t vould t i n g t h e matter u p a t
and
this conference, as’ between o u r bank a n d t h e Comptroller's
office i t i s n o w i n that condition.
wish t o state t h a t w e objected
Governor Harding: I
very strenuously t o a n y increase i n the rate f o r these
reports. I
exchanged several letters w i t h the Comptroller
and o n l y a g r e e d t o p a y $ 1 0 p e r r e p o r t a f t e r h e h a d a d v i s e d
me that w e would have t o take a l l o r none a t that price,
that w e c o u l d n o t h a v e t h e p r i v i l e g e
that w e w a n t e d t o p a y for.
correspondence,
and I
o f selecting t h o s e
p e o , e Leary lnbimated:in-
g o t t h e impression,
Bank w a s t h e o n l y o n e t h a t h a d n o t a g r e e d
respondence speals for. itself. I
fair c h a r g e
a n d we pay
tas
t h a t t h e Boston
t o it.
T h e cov
do- mot t h i e 2 5 - 2 3 6
L o Very p e i u c t a n t i y
s
.
Governor HMceKinney:
W O U - 0 e a e peasy r e
Governor Harding:
W e are paying $ 1 0 a report, b u t
we a r e n o t doing i t with a n y pleasure a t all.
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Federal Reserve Bank of St. Louis
417
Governor N o r r i s :
w
e h a d correspondence
character with t h e Comptroller,
o f the same
i n which v e endeavored t o
obtain t h e right t o get only such reports a s w e wanted.
He s a i d t h e a r r a r g e m e n t w a s p r e d i c a t e d u p o n e v e r y b a n k
taking all the reports, and that was the only way in
which h e could g e t t h e amount o f money that h e needed.
We then agreed t o it, o n the provision that every other
Reserve B a n k - d i d i t .
The Chairman: I
would l i k e t o c a l l a t t e n t i o n
important p o i n t ’ n
i t h i s connection.
w
e a r e paying
large costs f o r the performance o f a service .of the
Department,
amount
t h e effect o f which i s simply t o reduce
o f the taxes w h i c h
t h e Government
will ultimately
receive o u t o f the net earnings. T h i s was discussed a t ‘the
meeting w i t h i r e D e w e y ,
Ines
i
t is in a
sense o n l y bookkeep-
I t i s the only i t e m o f any importance where t h e
net r e v e n u e s
o f t h e reserve b a n k s a r e reduced b y a
consider-
able s u m , a b o u t $ 1 8 0 , 0 0 0 p e r y e a r f o r t h e b e n e f i t o f s o m e o n e
other than the Treasury.
I t is credited upon the cost
of examination which otherwise would b e assessed u p o n
the national banks, a n d m y first objection w a s t o making
payment b e y o n d t h e actual c o s t o f m a k i n g d u p l i c a t e reports.
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Federal Reserve Bank of St. Louis
418
The s e c o n d o b j e c t i o n
i s that t h e principle t h a t w e should
make a n y c o n t r i b u t i o n
o f a n y k i n d o u t o f o u r revenues
for s e r v i c e s p e r f o r m e d
o f this character t h a t produces a
prorit t o - a d e p a r t m e n t
o f the Government f o r i t s expense
account,
s o t o speak,
ple f o r us. t o accept.
could b e urged.
i s t o m y mind a
very unwise princi-
T h e r e a r e other objections t h a t
Now, I
want t o get t h e benefit o f these
reports i f w e can, a n d I certainly want t o preserve t o the
utmost t h e s p i r i t o f c o o p e r a t i o n b e t w e e n t h e examiners
the C o m p t r o l l e r a n d t h e F e d e r a l r e s e r v e b a n k s ,
mendation i s t h a t v e e f f e c t
of charges,
reduced t o a
a n adjustment
of
b u t m y recom-
o f this matter
s o t h a t b y gradual s t a g e s t h e a m o u n t w i l l b e
point w h e r e t h e Vomptroliler
i s put t o n o cx-
pense whatever i n p2denaPing t h e m , b u t o n the other hand
that
w e make
n o contribution
t o the cost
o f examinations
pa ee
Or S F @ o n c t e t i n g c n e - o r t i c e f o r t h e Comptrotler;
that b e done over a
that
period o f time sufficiently long that
it w i l l n o t i n v o l v e a n y h a r d s h i p u p o n h i s p r o g r a m o f espen-
ses which i s n o w apparently adjusted t o take u p this
Siaount
o r revenue. I
a m frank
t o s a that
m y recommendation
to m y directors w o u l d b e t h a t i f n o a d j u s t m e n t c a n b e m a d e
we discontinue taking t h e reports,
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Federal Reserve Bank of St. Louis
419
Governor Harding:
T h a t will b e m y recommendation
also.
Gqvernor Wellborn:
H y recollection i s that Mr. Cris-
singer s t a r t e d t h a t w h e n h e w a s C o m p t r o l l e r
as a
o f t h e CyPreney.
temporary matter.
The Chairman:
f o r . a year.
Governor “ellborn:
Y e s , until h e could get t h e
appropriation necessary.
Governor Harding:
H o w would i t do t o pay $10 until
the SOth o f next June, f o r the last six months o f 1925
$7.50, a n d thercafter o n l y t h e -ctual cost?
Governor iMcDougal:
somewhat d i f f e r e n t
O u r position i n this m a t t e r s
i
from that
o f B o s t o n a n d N e w York.
T h e
outlay i n Chicago o f course i s greater t h a n i n a r ether
district b e c a u s e o f t h e n u m b e r
o f banks w e have.
I t is
true that this w a s a temporary matter t o begin with.
is also true that t h e present Comptmoller made a
of situation,
a n d if I
remenber c o r r e c t l y ,
I t
statement
h e sugested
that w e consider this charge f r o m t h e standpoint o f service
rendered, a n d not frem the standpoint o f actual cost o f
preparing c a r b o n copies.
T h e matter w a s v e r y carefully
considered b y our board, a n d i t was concluded that the
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Federal Reserve Bank of St. Louis
420
service w a s worth what w e a r e asked t o p a y f o r it, a n d
that under t h e circumstances w e would meet t h e demand,
and make t h e payment.
T h e n e t result t o u s i s very dif-
ferent f r o m t h a t w h i c h h a s b e e n s t a t e d b y G o v e r n o r H a r d i n g
and Governor Strong.
W e consider i t saves u s considerable
instead o f costing u s anything, because under conditions
which a r e current a n d have been current f o r t h e last f e w
years,
i t w o u l d have: been n e c e s s a r y f o r u s t o h a v e g r e a t l y
extended o u r department o f examinations
i n order t o have
made t h e s e e x a m i n a t i o n s o u r s e l v e s .
The Chairman:
Y e s , but, Governor McDougal,
find j u s t i f i c a t i o n f o r t h e belief,
i f you
b y t h e v e r y terms
of
the F e d e r a l R e s e r v e A c t itself, t h a t t h i s i n f o r m a t i o n w a s
to b e available t o the Federal Reserve System without cost,
would y o u consider i t a prudent t h i n g t o p a y a service
charge f o r information which I believe, u n d e r t h e spirit
of the Act was contemplated t o b e put a t our disposal
automatically, without a n y payment being made f o r p ere
Governor MgDougal: I
d o not believe y o u are correct
in that, Governor Strong.
Governor Strong: I
reserve
A c t has wonvinced
think a n amlysis
o u r counsel
o f the Federal
that that
i s t h e case.
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Federal Reserve Bank of St. Louis
421
Governor McDougal:
U n t i l the establishment o f the
Federal r e s e r v e b a n k s e x a m i n e r s r e p o r t s w e r e s a f e g u a r d e d
and were never disclosed t o anyone o n the outside.
i t y im-
pression i s that i n placing t h e m a t our disposal t h e y have
simply a c t e d i n a
The Chairman:
salaries
spirit o f c o o p e r a t i o n
T h e n w h y d i d t h e Act provide that
o f examiners s h o u l d b e fixed, s u b j e c t
of t h e F e d e r a l R e s e r v e B o a r d ,
t o approval
a n d w h y d i d t h e y provide f o r
what t h e Act provides a s special examinations? I
think
it w a s t h e i n t e n t o f t h e A c t t h a t a n y e x a m i n a t i o n m a d e
by a
Federal r e s e r v e b a n k w o u l d b e @
because
special c x a m i n a t i o n
i t was intended t h a t t h e examinations o r d i n a r i l y
made w o u l d b e available
t o u s through reports
examiners t o the Comptroller,
mde
by
t o get credit information.
(After discussion: )
Governor Harding: I
move that this confcrence
authorize t h e C h a i r m a n o f t h e c o n f e r e n c e
mittee,of three,
t o appoint a
o f which h e shall b e the Chairman,
com-
to
take this matter u p with t h e Federal Reserve Board.
Governor Young: {
wild -second: that. motion.
(The motion, h a v i n g b e e n duly seconded, w a s carried.)
The Chairman:
T h e Chair will appoint Governor Norris
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Federal Reserve Bank of St. Louis
and G o v e r n o r B a i l e y a s m e m b e r s
(thereupon,
o f t h a t committee.
a t 11:50 otclock p . m., t h e Conference
adjourned until t w o o'clock p . m. o f the same day, t h e
committee j u s t a p p o i n t e d
b y t h e Chair t o consult w i t h t h e
Federal Reserve Board during the recess.)
The c o n f e r e n c e r e c o n v e n e d p u r s u a n t
recess,°
t o the taking o f
a t 22th o'clock pe- m s
The Chairman:
T h e meeting will come t o order.
Governor Norris:
all o f t h e m e m b e r s
Y o u r committee
o f three m e t w i t h
o f t h e R e s e r v e Board, e x c e p t t h e S e c r e -
tary o f the Treasury a n d t h e Comptroller o f t h e Currsncy.
Governor Strong stated that t h e copies o f reports o f
national b a n k examiners,
w h i c h were secured
ler, w e r e o f v a r y i n g v a l u c
b y t h e Comptrol-~
i n different d i s t r i c t s ;
in s o m e d i s t r i c t s t h e y w e r e v a l u a b l e a l m s t ,
to t h e p o i n t o f b e i n g indespensable,
that
i f n o t auite,
b u t that there was
a general feeling o n the part o f the Governors t h a t t h e
practice
o f paying t o t h e Comptroller a
figure f o r t h e s e
reports which was based upon what might b e called their
commercial value t o us, rather t h a n upon the cost o f making
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Federal Reserve Bank of St. Louis
425
copies, w a s a
practice t h a t w a s o f d o u b t f u l l e g a l i t y a n d
which w e f e l t w a s d i s t i n c t l y improper, b e c a u s e
i t was i m -
posing u p o n t h e Federal Reserve Banks a n expense which the
law c o n t e m p l a t e d s h o u l d b e i m p o s e d u p o n t h e n a t i o n a l b a n k s
that were examincd, a n d t o t h e e x t e n t
imposed u p o n t h e r e s e r v e b a n k s
t h a t charge was
i t d i m i n i s h e d t h e revenues
of the United States Government a n d was i n relief o f the
national banks,
T h e general attitude o f the members o f
the B o a r d w a s t o i n q u i r e w h a t t h e y c o u l d d o a b o u t i t ; w h a t
sugszestion w e h a d t o make;
order t o t h e ( o m p t r o l l e r
t h a t they could not issue a n y
o f t h e Currency,
that they had
no control over him, a n d that t h e y h a d been advised b y
counsel t h a t t h e l a w d i d n o t i m p o s e u p o n h i m t h e o b l i g a -
tion t o furnish these reports t o u s free o f charge o r t o
furnish them a t all. T h e r e w a s considerable discussion a s
to what, i f anything, might b e done about it, and i t was
finally agreed, a n d the motion was adopted, t h a t 4 further
conference s h o u l d b e h e l d b e t w e e n t h e S e c r e t a r y o f t h e
Treasury,
t h e Comptruller a n d t h e members
with the Governor o f the Board,
o f t h i s committee
o r with t h e members o f the
b discussed further,
Board, a t which t h e matter s h o u l d e
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Federal Reserve Bank of St. Louis
424
The m e m b e r s
o f your c o w m i t t e s t o o k t h e p o s i t i o n t h a t
if this p r a c t i c e w a s t o b e c o n t i m e d
a t all they d i d n o t
wish i t t o b e continued a s a private o r secret matter,
and t h e y t h o u g h t t h e S e c r e t a r y o f t h e T r e a s u r y s h o u l d
have knowledge o f it, a n d i t also w a s desirable t h a t Congress should have knowledge o f it.
The Chairman: I
think what y o u say, a s I listen,
Governor Norris, d o e s n o t give t h e impression that w e tried
to give t h e Federal Reserve Board, t h a t there -ere those
in the meeting here w h o felt that i f some o f u s withdrew
from buying these teports i t would place a n added wmrden
upon t h e o t h e r b a n k s b e c a u s e
ve a l s o p o i n t e d
o f t h e p r o b a b l e r a i s e d price.
o u t that this was originally a
matter
which
was d e a l t w i t h b y t h e B o a r d o f f i c i a l l y w i t h t h e f i r s t c o m p -
troller, a n d that w e n o w felt that t h e y were unwilling t o
continue t o d e a l w i t h i t , a n d a l s o t h e r e w a s n o l i m i t t o t h e
amount orf charge t h a t m i g h t u l t i m a t e l y b e m a d e b y s o m e
new C o m p t r o l l e r w h e n h e c a m e i n ,
T h e matter w a s l e f t
by the passage o f a resolution, w h i c h left i t with Governor Crissinger t o arrange f o r a meeting w i t h the Secretary
of the Treasury a n d Under-Secrétary iinston, w h o works u p
the details o f this matter a s a rule f o r t h e Secretary,
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Federal Reserve Bank of St. Louis
with t h e U o m p t r o l l e r
o f t h e Curreney a n d t h e members
the F e d e r a l R e s e r v e Board,
the Governors! Conference.
of
a n d t h e committee representing
G o v e r n o r Bailey explained
it
would b e i m p o s s i b l e f o r h i m t o c o m e b a c k a n d a t t e n d a
meeting a t a later date,at a
Mp. D a w e s
nearby date, a t least,
h a s l e f t t h e C i t y until n e x t week,
suggested t h a t s o m e o n e b e a p p o i n t e d
Bailey's place. [
a n d i t was
t o a c t i n Governor
took t h e liberty, n o t w i t h s t a n d i n g w h a t
Governor H a r d i n g s t a t e d t e f o r e lunch,
a n d because
great f a m i l i a r i t y w i t h t h e s e m a t t e r s - - -
o f his
h e i s the only
one who i s familiar with both sides o f the negotiations
with C o m p t r o l l e r ‘“ijlliams,
Harding b e m a d e a
member
o f s u g y esting t h a t G o v e r n o r
o f the Comittee
t o take Mr.
Bailey's place. B e s i d e s that I am sorry t o say that there
has b e e n a
little e v i d e n c e t h a t C o m p t r o l l e r D a w e s r a t h e r
him
resénted m y attitude about this e n d I did not want t o
feel that I was leading a movement t o dereat this program
and I would v e r y much like t o have someone there w h o i s
familiar w i t h this t o discuss it. G o v e r n o r Norris served
on the comnittec t h a t nezotiated t h e first matter w i t h
the Comptroller, G o v e r n o r H a r d i n g k n o w s t h e p r e v i o u s h i s tory b e t t e r t h a n I
do, a n d I
think i t w o u l d b e v e r y p r o p e r
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Federal Reserve Bank of St. Louis
for him to discuss this matter with them, because I can
MOb- s c e q u a v e l y - d é a l w i t h 7
Governor Harding:
i
gentlemen that I serve, I
The Chairman: I
have y o u d o s o ,
t e - p a e vesire o f “you
will b e glad t o d o it.
think everyone will b e glad t o
A r e y o u s a t i s f i e d w i t h t h e rcoport, G o v e r -
nor Young?
Governor Y o u n e s
Y e s .
Governor M c D o u g a l :m
Governor Y o u n g : I
satisfied, i r . Chainman.
a m satisfied
with the method
of
procedure.
The Chairman:
I
n view o f the action taken b y the
Federal Reserve Board, I
understand i t t o b e the sense o f
the c o n f e r e n c e t h a t t h e r e i s n o f u r t h e r i m m e d i a t e a c t i o n
to b e t a k e n
a t this meeting;
changed b y t h e s u b s t i t u t i o n
t h a t t h e cormmittee
o f Governor H a r d i n g t o take
the p l a c e o f G o v e r n o r Bailey,
quest meeting,
pleasure
i s now
w h o cannot attend a
subse-
a n d t h a t t h e conmmittce w i l l a w a i t t h e
o f t h e Federal Reserve B o a r d i n arranging a
meet-
ing with t h e Secretary o f t h e Treasury.
I want
n o w t o refer
t o tivo m a t t e r s
been discussed o n the program.
that have already
W e discussed t h e matter o f
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Federal Reserve Bank of St. Louis
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FESserves a g i n s t t i m e d e p o s i t s in. t h e U s l i f o r n i a d i s t r i c t
and d i s p o s e c
o f that before w e acted o n the appointment
the c o m m i c t e e
o n r: .
I
d i d n o t - want to: forecitose
Governor C a l k i n s f r o m a n o p p o r t u n i t y
referred
t o a
committsce,
of
t o a s k that that b e
i f h e would prefer
bd
t o have that
action considered b y the conrerence.
Governor C a l k i n s ; I
the conference.
a m satisfied w i t h t h e action o f
T h e r e w a s s o m e inconsistency s h o w n i n
the s u b s c q u e n t discussion.
The Chairrian:
Y e s , b u t I just wantea t o make sure
that w e d i d n o t h a v e a n i n c o n s i s t e n t r e c o r d .
I t was a n
oversight o n m y part a n d was called t o m y attention b y Mr.
Harreson,
Governor Calkins: P e r s o n a i l y , I
be r e f e r r e d
t o t h e committee
do n o t think i t should
o n reserves.
Mr. Harrison:
H o w i s t h e matter l e f t n o w ?
The Chairman:
T h a t w e d i d n o t refer t h e auestion
to t h e committee.
The o t h e r m a t t e r i s t h e q u e s t i o n o f t h e a m e n d m e n t o f
the r e g u l a t i o n
i n t h e B o a r d ' s l e t t e r X-4099, w h i c h w a s dis-~
cussed j u s t b e f o r e lunch.
as unfinished business. I
T h a t i s bound t o come u p again
just want t o remind y o u that w e
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Federal Reserve Bank of St. Louis
428
are going t o make a n effort t o dispatch this program d e ~
finitely
b y s o m e action.
I
f you a r e satisfied
t o leave
iG a s a matter l a i d on: the table, a l l right, b u t i t will
probably c o m e u p a g a i n t o b o t h e r u s .
Governor Norris: I
about t h a t .
would l i k e t o a s k a
question
T h o s e advices a r e given o v e r t h e commercial
wires, a r e they not?
The Chairman:
Y e s , t h e y a r e s u p p o s e d t o be.
Governor N o r r i s :
G o v e r n o r Seay's objection
t o i t and
Governor: Biggs' objection t o i t was t h e cost. N o w , i f
those a r e t h e facts, I
would like t o a s k the further
question w h e t h e r t h e w h o l e m a t t e r m i g h t n o t b e t a k e n c a r e
of b y sending those telegrams collect.
The C h a i r m a n :
system,
D o y o u send t h e m over t h e private
wire
Governor Seay?
Governor Seay:
The Chairman:
Governor S e a y :
N o .
Y o u p a y f o r t h e m yourself?
W e
d o n o t m a k e t h e m unless
nested b y the sending bank,
i t i s rex
o r the transaction bears
evidence t h a t i t s h o u l d b e sent,
Governor F a n c h e r :
of t h e m e m b e r b a n k ?
A
t your expense,
o r t
h
xpense
e
e
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Federal Reserve Bank of St. Louis
428 @
Governor Seay:
w e absorb it, a n d that i s what w e
Governor Biggs:
T h a t i s the leased wire instead o f
the commercial wire.
Governor Seay:
T h a t i s where w e save.
us t e n o r f i f t e e n t h o u s a n d d o l l a r s
The Chairman:
I t would cost
i f w e g a v e t h e right.
T h e regulation seems t o contemplate
that t h i s r e g u l a t i o n s h o u l d a p p l y t o t h e l e a s e d w i r e s e r -
VLCC,
Governor Biggs:
T h a t i s what i t is, t h e leased wire.
We had i t u p with t h e Board, a n d w e figured i t out that
there w a s a
cost f o r s e n d i n g 5 0 0 t e l e g r a m s a
estimating e a c h t e l e g r a m a t a
a year,
dollar,
month,
and
i t r e p r e s e n t e d $ 6 , OOO
a n d o u r i d e a , w a s n o t t o b u r d e n t h e w i r e s w i t h them,
The Chairman: I
think a way that would b e satisfac-
tory t o everybody would b e refer i t to the leased wire
committee,
Governor Young: I
will m o v e t h a t t h e p r e v i o u s a c -
tion o f this conference o n the matter b e reconsidered,
that a
resolution b e passcd,
and
n o t i n t h e t e r m s y o u propose,
but that i t b e referred t o t h e leased wire committee,
to
study t h e matter i n collaboration w i t h t h e standing commit-
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Federal Reserve Bank of St. Louis
429
tee
o n Collections
a n d make recommendations
t o t h e Feder-
al Reserve Board which will w i n g about a reconcilement o f
practices w i t h t h e regulations o r o f the regulations w i t h
the practices.
Governor Seay:
I w i l l second that,
(The motion, h a v i n g b e e n duly: econded, w a s carried.)
The Chairmans
T h o next topic f o r consideration i s
4~(e).
4-(e) B r a n c h Directors.
Brrects o f i n c r e a s i n g t h e n u m b e r
of directors o f branches i n conformity w i t h t h e Board's l e t t e r X-3956;
and a d v i s a b i l i t y o f r e c o m m e n d i n g t o
Board t h a t b r a n c h e s
b e operated under
rules a n d r e g u l a t i o n s a p p r o v e d b y t h e
Board a s p r o v i d e d b y law, r a t h e r t h a n
by by-laws.
Governor Calkins:
T h e Federal Reserve B o a r d h a s i s -
sued a regulation which increases t h e number o f directors
in e a c h b r a n c h f r o m f i v e t o s e v e n a n d prescribes
in which they shall b e elected, a n d s o forth.
t h e way
W e have
five branches i n our district a n d w e have b e e n operating
e r t h a n a n y o t h e r F e d e r a l R e s e r v e Bank.
branches l o n g gz
have a very satisfactory organization.
‘we
T h e matter has
been discussed b y the Board of Directors o f the Federal
o f the
Reserve B a n k o f S a n Francisco, t h e opinions o f all
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Federal Reserve Bank of St. Louis
430
branch d i r e c t o r s h a v e b e e n secured,
o r practically a l l o f
them, a n d w i t h o u t o n e d i s s e n t i n g v o i c e t h e y a g r e e d t h a t
it was undesirable t o increase t h e number o f branch directors o r t o change t h e present organization.
members
O n e o f the
o f t h e board sugsested t h a t i f that regulation w a s
a tentative regulation, a n d i f the S a n Fpancisco b a n k was
of opinion that its present mode o f operation was satisfactory, t h e Board might suspend it. I
do n o t know h o w the
other governors w h o have branch banks feel about it.
Governor Bailey:
they d o yours.
T h e y will have t o suspend ours i f
w e d o n o t n e e d s e v e n directors
a t our
any more t h a n a cat needs another tail.
Governor Calkins:
T h e net result would be a consider-~
able increase i n the cost with no increase i n efriciency,
and that seems t o be contrary t o the purpose o f the Federal
reserve banks a t the presenc time and also the purpose
of the: Board.
I would l i k e
t o a s k whether
a n y governoris
of t h e o p i n i o n t h a t t h e e f f i c i e n c y o f h i s b r a n c h e s w o u l d
pe increased b y increasing the number of cirectors from
five t o séven?
Governor S e a y :
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Federal Reserve Bank of St. Louis
The Chairman:
Governor Seay:
The Ghairman:
H a v e y e u that opinion?
ee
Q i t e t h e contrary, M r . C h a i r m a n ,
L e t u s g e t a résponse t o that first.
Governor ‘Yellborn: L
WAL) respond to. that.
1 ° think
it i s a good thing t o bring i n some outside m e n from the
town i n which t h e branch i s located,
i f they a r e influen-
tial m e n a n d t h e y a d d t o the efficiency o f the bank. I
think i t i s a n o p p o r t u n i t y
t o popularize t h e Federal Reserve
Systom itself a n d get t h e m acquainted w i t h it, a n d all o f
that h e l p s w h e n i t c o m e s t o t h e a u e s t i o n o f a
the c h a r t e r
renewal
of
o f t h e System.
Governor Harding:
H o w many men have you in the Bir-
mingham Branch?
Governor “Well born:
Governor Harding:
Governor “ellborn:
Montgomery, ifr. Hardy.
it would help.
w
e h a v e rive,
‘ h o would y o u get?
‘ ¢ € would g e t a good m a n from
H e would be(glad t o come, 1
think
W e d o a great m a n y things t h a t a r e more
expensive t h a n that, a n d I would endorse t h e action o f the
Board.
Governor S e a y :
P AEe each I
sive o f t h e u l t i m a t e e f f e c t s
a m g e n u i n e l y apvoreheno f this m o v e o n t h e part o f
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Federal Reserve Bank of St. Louis
the Board.
‘ W h a t G o v e r n o r B a i l e y s t a t e d i s a n illustration,
to b e g i n with,
a s t o what i s likely t o happen i n t h e choice
of t h e s e directors.
T h e heading o f t h e provision o f t h e
Federal R e s e r v e A c v w h i c h a u t h o r i z e s t h e F e d e r a l R e s e r v e
Banks t o establish branches i s headed "Branch offices".
In thetext o f the provision itself i t alludes t o a "branch
bank",
that a
W e are advised legally, I
believe competently,
Federal r e s e r v e b a n k i s o n e e n t i t y a n d t h a t t h e
directors
of a
feceral r e s e r v e b a n k c a n n o t d i v e s t t h e m -
selves o f responsibility f o r branches.
T h e directors o f
the F e d e r a l r e s e r v e b a n k d o n o t r u n i t , I f t h e y a t t e m p t
run it, a s I
believe
to
i t i s v e r y l i k e l y t h a t t h e y will,
I cannot see how anything but disruption i s likely t o
result.
T h e y have nothing b u t a supervisory capacity;
they have nothing t o occupy t h e m i n running t h e details
of the bank, I
with p o w e r
do not think they ought t o b e invested
i n the operation o f a
them under: the Act.
banks themselves I
branch t h a t i s n o t g i v e n
T h e directors o f the federal reserve
think a r e charged with that authority.
As s u r e a s a n y t h i n g i s true, w h i c h h a s n o t a l r e a d y t r a n s pired,
i t will result
i n contention f o r independent a c t i o n
on the part o f the branches. I
believe t h e creation un-
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Federal Reserve Bank of St. Louis
453
necessarily o f a board o f that size, i f they a r e m e n o f
standing a n d influence, w i l l inevitably result i n their
feeling that t h e y a r e coming together f o r n o purpose, a n d
they w i l l e n d e a v o r
t o develop a
situation w h e r e b y t h e y w i l l
be b r o u g h t t o g e t h e r f o r s o m e purpose,
a n d i t cannot result
in a n y t h i n g b u t s o m e c l a m o r f o r i n d e p e n d e n c e
o n the part
of t h e branches,
The Chairman: 1
4 6 n o t T i k e t o interrupt,- but. I d o
want t o s h o r t e n t h i s d i s c u s s i o n
Governor S e a y : I
sarily,
b u t t h e matter
i n s o m e way.
d o n o t w a n t t o p r o l o n g i t unnesesi s o f such f a r reaching consequence
in m y p e r s o n a l j u d g m e n t - - - I
have n o t d i s c u s s e d
i t i n this
manner w i t h our directors--- b u t I believe i t i s one o f the
most serious things t h a t t h e Reserve Board has undertaken
to d o for 8 long time,
The Chairman;
W e a r e o n e o f the banks that has a
board o f s e v e n d i r e c t o r s
i n o u r b r a n c h a t Buffalo.
I t w a s
seven
increased t o members i n order t o give representation t o
banks
i n t h e C i t y o f Rehester,
Cnty.
M y . Harrison feels that the Board could b e reduced
to rive, a n d w e f e e l t h a t a
w h i c h i s q u i t e a n important
board o f f i v e i s d e s i r a b l e
rather t h a n a board o f seven, a n d would prefer it.
T h e
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Federal Reserve Bank of St. Louis
454
only thing I
havé recently heard about t h e activities o f
the directors i n Buffalo i s that some o f them feel that
they would like t o have a
larger field o f business, t h a t
they w o u l d l i k e t o h a v e t h e a c c o u n t s a c t u a l l y t r a n s f e r r e d
to Buffalo, a n d they feel that t h e y a r e only rubber stamps
so long a s the branch i s controlled b y New York.
i t y only
feeling i s that uniformity i s desirable, b u t i f jt involves
the increasing o f the boards f r o m : a
five t o seven,
where there are five, then i t would b e better not t o have
Lt uniform, a n d i f uniformity i s essential, t h e n i t would
be better t o have five rather t h a n seven,
Governor Harding:
Section 3
provided f o r not less
than five o r more t h a n seven, a n d i t specifically leaves
a little latitude i n the matter.
Governor “Jellborns
T h e N e w Orleans b r a n c h h a s a l -
ways had seven directors, t w o from the outside.
Governor Calkins:
I T m v e i t i s the view o f this
conference t h a t i t i s u n d e s i r a b l e
the n u m b e r o f directors
t o have a n increase
o f branches f r o m f i v e t o seven,
but t h a t t h e m a t t e r s h o u l d b e l e f t t o t h e j u d g m e n t
the d i r e c t o r s
of
o f those Federal Reserve banks t h a t h a v e
branches.
Governor Young: I
in
will second that.
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Federal Reserve Bank of St. Louis
435
Governor Yeay:
desirable,
T h e r e i s one other point t h a t i s un-
i n m y judgment,
or t h e
the title t m Chief bxecutive o f the branch t o managing
director,
Govornor Calkins: I
will amend m y resolution t o in-
tluds t h e statement t h a t i t i s undesirable t h t those banks
operating branches should b e required t o change t h e char
acter o f their organization b y increasing t h e number o f
directors f r o m five t o seven, providing t h a t one o f the directors other t h a n manager b e made Chairman o f the Board,
and p r o v i d i n g t h a t t h e m a n a g e r s h a l i b e c a l l e d m a n a g i n g
director, b e c a u s e
i t will h a v e a
tendency t o increase t h e
autonomy o f the branch directorate a n d tring about conten-~
tion between i t and the head office,
Governor Seay: I
will second that.
Governor Wellborn: I
in the original form. I
would prefer
t o have t h e motion
a m with y o u o n the matter o f the
changing o f the title t o managing director,
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Federal Reserve Bank of St. Louis
456
(The motion, having been duly seconded, w a s carried.)
Governor Calkins: I
would like t o ask Governor ‘iell-
born w h y h e feels t h a t i t i s objectionable t o vote o n the
question o f sreaquiring those branches that now have five
to h a v e s e v e n ?
I G would: n o t e h e n g e T i s situation. aG.ai..
Governor “iellborn:
we b e p e r m i t t e d
I t would change it,
t o have s e v e n ?
Governor C a l k i n s :
M i e
Governor Wellborn: I
iJished a
wanch
H o w would
AGG@savc oso,
remember o n c e w h e n w e esstab-
w e wanted s e v e n a n d t h e y s a i d five would
Det S u i t e ten.
Governor Seay: I
offer a
hope Governor C a l k i n s w i l l n o w
distinct resolution covering his amendment t o the
first one,
a n d Iwill take pleasure i n seconding it.
Governor Callcins: I
move i t i s t h e s e n s e o f t h e m e e t -
ing itteis undesirable t o require that a member o f the Board
of directors o f the branch, other t h a n t h e manager ,shall
act a s Chairman, a n d not desirable t o change t h e title o f
manager o f the branch t o managing director.
Governor Seay: T
second the motion.
(The motion, having been duly seconded, w a s carried.)
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Federal Reserve Bank of St. Louis
Governor C a l k i n s , v o u r topic aisc
a reference t o operating under rules instead o f
by-laws.
D
o y o u w i s h t o discuss t h a t ?
Governor C a l k i n s : I
do wot desire a
discussion
of
that, M r . Chairman,
The Chairman:
T h e n that topic i s withdrawn.
The next topic i s 4-(i)
ot) Holdings
o f r e a l e s t a t e b y Federal
Reserve Banks.
Has t h e r e e v e r b e e n a ruling m a d e b y
the Federal reserve Board authorizing
the r e s e r v e b a n k s
t o hold real estate?
This esvecially applies where r-al
estate h a s b e e n t a k e n i n d u e c o u r s e o f
business. T h e N a t i o n a l B a n k A c t p r o vides f o r s u c h cases.
That i s p u t o n b y Dallas.
Governor McKinney: I
take.
think t h e r e m u s t b e s o m e m i s -
[ T aid n o t put that topic o n the program.
Governor Bailey:
T h e o n l y thing i s that under t h e
provision t h a t y o u c a n h o l d
National B a n k a
land that you take i n i n due course.
T h e r e i s no provie«
sion in the Federal Reserve Act. I
would like to have
that c l a r i f i e d b e c a u s e I - w o u l d l i k e
pieces
o f land.
4 r e w e compelled,
t o take one
u n d e r t h e Federal
Reserve Act, t o sell t h e land i n five years?
Governor Y o u n g :
N o .
o r two
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Federal Reserve Bank of St. Louis
4.48
Gowrnor ( l k i n s :
Section 7
of the Federal Reserve
Act reads: "Federal reserve banks, including capital
stock a n d s u r p l u s t h e r e i n ,
a n d t h e income derived fherefrom
shall b e excempt f r o m federal, s t a t e a n d local taxation,
except taxes o n real estate."
Governor McKinney:
M i g h t n o t t h a t b e construed a s
applying o n l y t o t h e b a n k b u i l d i n g s ?
The Chairman:
I
f there w a s legislation
o n this s u b -
ject y o u w o u l d b e l e s s f r e e i n d e a l i n g w i t h t h e m a t t e r t h a n
you are without legislation.
Governor R B a l l e y :
to k n o w w h e t h e r
T h a t i s probably true, b u t I
wanted
o r n o t w e c o u l d c a r r y i t until w e g o t r e a d y
to Seik tes
The Chairman:
T h e r e i s nothing
i n t h e A c t t o prohibit
you from exercising t h é constitutional right which y o u enjoy t o c o l l e c t y o u r debts.
A
s 1t- Is, y o u a r e pretty: f e e e
in h a n d l i n g t h e matter.
Governor Calkins: I
would l i k e t o r e a d a n o t h e r p r o -
vision o f the Act, Section 4: " s e v e n t h , t o exercise b y
its board o f directors, o r duly authorized officers o r
agents, a l l powers specifically granted b y the provisions
of t h i s a c t a n d s u c h i n c i d e n t a l p o w e r s
a s shall b e necessary
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Federal Reserve Bank of St. Louis
439
to carry o n the business o f banking within the limitations
prescribed b y this act."
Governor Biggst
w e take anything. I
took t w o hun-
dred chickens f o r twenty-four hours.
The Chairman:
the p r e s e n t s t a t u s
I f Governor B a i l e y i s satisfied w i t h
o f t h e proposition,
w e will pass t o
topic 5 , F i s c a l A g e n c y a n d D e p o s i t o r y Operations.
5-(a) P r o c e d u r e n o w being followed i n the
execution o f o r d e r s f o r t h e
Treasury D e p a r t m e n t ,
I would like t o a s k this question, a n d i n order t o
shorten t h e discussion, I
will assume that anyone w h o does
not reply has n o answer t o make t o the direct cuestion.
we h a v e a
rule i n t h e B a n k o f N e w York, w h i c h w a s a d o p t e d
most c a r e f u l c o n s i d e r a t i o n
the T r e a s u r y
a n d w i t h o u r o w n directors,
shall b e e m p l o y e d
association o f a
with t h e F e d e r a l
employed
o f this matter w i t h
that
n o broker
b y t h e FPececral R e s e r v e B a n k w h o h a s a n y
personal c h a r a c t e r w i t h a n y o n e c o n n e c t e d
R e s e r v e S3ank,
Second,
e v e r y broker
«
t o execute orders, w h e t h e r f o r t h e Federal K e -
serve b a n k o r f o r t h s T r e a s u r vy
s» h a l l s u b m i t
his f i n a n c i a l
a n annual
statement t o t h e bank o f condition’: third, t h a t w e shall
not a p p o i n t a n y b w o k e r w h o c a r r i e s s p e c u l a t i v e m a r g i n a c -
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Federal Reserve Bank of St. Louis
440
counts; - fourth, t h a t t h e directors shail make a l l o f these
appointments,
of flesra. I
t h a t t h e y shail n o t b e given o u t b y the
wanted t o k n o w w h e t h e r t h a t p r a c t i c e w a s f o l -
Lowed i n the other reserve banks,
T h e n I would like t o
ask i f there i s a n y material dissent f r o m a n y o f the
views t h a t I
in t h r o w i n g a
have e x p r e s s e d w i t h r e g a r d t o c u r p r o c e d u r e
safeguard a r o u n d t h i s matter?
Governor Young:
N o n e whatever, M r , Chairman.
think y o u h a v e g u a r d e d i t a s w e l l a s y o u p o s s i b l y c a n .
Governor i{¢Dougal: I
would like t o inouire from
Governor S t r o n g w h e t h e r t h e p u r c h a s e s n o w m a d e b y t h e
Treasury Department a r e a l l registered o r made o n the exchanges~-- I
know they a r e not, a n d I really d o not mean t o
ask i t i n t h a t way.
The Chairman:
T h e y a r e a l l made that w a y except i n
certain c a s e s w h e n t h e Treasury--- w h e n w e h a v e o p p o r t u n ity t o b u y f o r t h e T r e a s u r y
i n l a r g e blocks,
a n d those
cases a r e always speciallysubmitted t o t h e Treasury, w h e r e
ache. U S E
ee x c h a n g¢
to m a k e t h e purchase.
transaction
j
g e t special permission
W h e n i t 1 s made a
record o f t h e
i s kept w h i c h shows w h a t price t h a t particular
issue w a s s e l l i n g o n t h e b o a r d f o r a t t h a t time,
s o that
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Federal Reserve Bank of St. Louis
447
the question o f pricc, w h i c h i s a n important thing, a n d
which c a n b e fixed b y the records o f the Stock exchange,
is f i x e d i n t h e F e d e r a l R e s e r v e B a n k i n s t e a d o f b y reference t o s t o c k exchange’ trades.
W
e always g e t a
quotation
from the board showing a t what rate t h e y a r e selling o n
the board a t that time.
If there i s nothing further i n connection with thet
we will pass t o Topic 5~(b), suggested b y St. Louis.
aebcnture b o n d s
sderal L a n d a n d I n t e r -
redit Banks.
Governor Biggs:
It i s recom ended that i n the interest o f economy a n d
uniformity, t h e same policy b e pursued i n connection w i t h
the redemption o f the debenture bonds issued b y the
Federal Land a n d Intermediate Credit Banks a s i s n o w
followed i n connection with t h e payment o f Federal F a r m
Loan coupons.
a result o f the last report o f the leased w i r e conmittee,
i t i s n o longer t h e practice
t o send telegrams
to
New Y o r k a d v i s i n g t h e a m o u n t o f Federal F a r m L o a n c o u p o n s
each day, b u t i n s t e a d t h e t o t a l s
o f coupons p a i d a r e h a n d l e d
as deductions f r o m credit t o the gold settlcoment f u n d o f
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Federal Reserve Bank of St. Louis
442
coupons,
a n d t h e necessary advice goes forward
In t h e i n t e r e s t
o f e c o n o m y a n d uniformity,
b y mail.
w e have sug-
gested that t h e same policy b e pursued i n connection w i t h
the r e d e m p t i o n o f debenture b o n d s i s s u e d b y t h e F e d e r a l
Land a n d Intermediate Credit Banks.
The Chairman:
T
s that offered
i n t h e form-of s
motion?
Governor Biggs;
yes,
Governor Young: I
will second that.
(The motion, having been duly seconded, w a s carried.)
The C h a i r m a n :
T h e next
i s
Cancelled U n i t e d s t a t e s b o n d s , n o t e s
and Treasury certificates o f indebtedness l o s t i n t h e m a i l s w h i l e
to Washington.
e n route
x p e r i e n c e o f Federal
Reserve B a n k o f S a n Francisco, w h i c h
Was r e q u e s t e d b y T r e a s u r e r t o m a k e r e s titution f o r l o s t b o n d s b e c a u s e s e r i a l
numbers o f b o n d s s t o l e n w h i l e i n transit. c o u l d n o t
Governor Calkins:
b e correctly given.
T h e Governors h a v e a l l b e e n advised
with r e g a r d t o t h e e x p e r i e n c e
o f Y a n Francisco
i n connec-
tion with t h e handling o f cancelled certificates.
ter w a s p u t o n t h e p r o g r a m f o r discussion,
T h e mat-
i f any discussion
was desired.
A p p a r e n t l y t h a t incident
i s n o w closed,
the o c u e s t i o n
i s --hether
that
i t i s desirable
but
w e should have
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Federal Reserve Bank of St. Louis
some f u r t h e r p r o t e c t i o n .
Governor ‘icKinney:
‘ j a s i t closed i n a
manner s a t i s -
factory t o y o u r b a n k ?
Governor Calkins:
should s a y not.
N o , I
I t was
closed b y r e a s o n o f t h e f a c t t h a t w e w e r e a b l e t o f i n a l l y
discover
t h e records
that cnabled
u s t o give t h e numbers
reguired,
that t h e T r e a s u r y D e p a r t m e n t
i n other words w h i c h
enabled u s t o d e t e r m i n e w h a t m i s t a k e h a d b e e n m a d e a n d
where.
I
f w e h a d n o t b e e n able t o d o that t h e Treasury
Department w o u l d u n d o u b t e d l y h a v e i n s i s t e d u p o n o u r m a k i n g
restitution.
The Chairman:
in a
I
n our bank t h e m e n feel that w e a r e
position w h e r e w e w i l l a l w a y s
numbers. I
think t h e Treasury
was
b e able t o locate t h e
i n a
position where
they were confronted w i t h t h e situation o f having n o discretion
i n t h e matter.
Governor Calkins:
W
e felt t h a t w e would b e i n 4
position t o f i n d t h e numbers,
that w e were not, a t first;
a n d apparently discovered
a n d I can casily s c e a m t h e r
situation t h a t m i g h t a r i s e i n w h i c h y o u c o u l d n o t f u r n i s h
the n u m b e r s a n d i n w h i c h w e c o u l d n o t r u r n i s h t h e numbers.
Governor Seay:
T h a t refers t o a matter that happened
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Federal Reserve Bank of St. Louis
about t w o years ago?
Governor Caliins; Y e s .
w y ovm opinion i s that the
Treasury i s “unable t o r e l a x i t s ruling,
a n d that t h e o n l y
remedy w e h a v e i s t o i n s u r e t h e m a t o u r o w n ¢ . p e n s e
te
e p onse o f tne. Treasury, “one oT, tae oprer.
Treasury cannot relax i t s ruling, I
or ay
i f the
think w e ought t o be.
allowed t o insure f o r o u r o w n protection, I
do not think
any action i s needed b y this conference, unless t h e matter
comes u p again.
again.
T h e Treasury h a s m t f o u g h t
T h e Governors,
i t up
s o far a s I have communicated w i t h
them, w i t h -the-exception o f the N e w York Bank, w e r e Unanimous
i n favor
o f the position that
w e have taken,
that
w e
should n o t b e called u p o n t o stand a loss o f that sort
unless
w e a r e protected
The Chairman:
b y insurance.
T h e n e x t t o p i c i s 6-(a).
6-(a) V o l u n t a r y S e r v i c e s -
I n view o f small
‘arnings, c a n Federal Reserve Banxs continue t h e f r e e v o l u n t a r y services,
o r
Should t h e sctual. c o s y o f some. o r a l
of t h e s e s e r v i c e s
ber b a n k s ?
b e charged
t o t h e men-
This i s @° matter that has really b e e n disposed. of: b y
our action recommending t h a t n o discontinuance b e made a n d
no charge b e made, except i n the same o f non-cash collec-
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Federal Reserve Bank of St. Louis
tions, w h i c h h a s b e e n r e f e r r e d
to a
committee f o r study.
Ig any further action desired?
Governor McDougal: I
subject
was o n e o f those w h o p u t that
o n t h e program,
The Chairman:
A r e - you. satisfied w i t h t h e a c t i o n
taken?
Governor McDougal: I
a m for the moment. I
want t o
call t h e attention o f the conferenca® t o a very satisfactory d e w e l o p m e n t
i n the discussion
“that -you- pointed e u t yourself,
o f t h a t matter, a
tstter
a n d that i s that w e a r e
being hammered i n every way, w e are having frequent
interviews w i t h r e s p e c t
t o expenses,
and I
think i t s h o u l d
be borne i n wind b y all w h o have supervision over t h e operation o f these Federal reserve banks t h a t t h e expenses n o w
are t r a c e a b l e
very largely
t o t h e voluntary services
which
I think t h e B o a r d i t s e l f s h o u l d b e a r t h a t i n
wind, a n d i f 1 t sis i n t h a t r e s p e c t t h a t t h e y w a n t e x p e n s e s
cut down,
w e w a n t t h e m t o t e l l u s , t h a t i s all.
The Chairman;
T h e next is 6-(b).
6-(b) “ h a t can be done when a member bank
refuses
t o comply w i t h t h e regulations?
(Topic 6-(b) w a s withdrawn f r o m t h e program. )
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Federal Reserve Bank of St. Louis
The Chairman:
T h e ne>t i s topic 6+(c).
6-{c) ‘svamination o f State banks.
Governor C a l k i n s :
of discus z
tion t a k e n
T h i s was put
o n for t h e purpose
the procedure i n various d i s t
b y examining department
o
regard r
state m e m b e r
banks w h i c h h a v e n o t maintained, a f t e r m e m b e r s !
a standard
pass
s Go a e
a s . hien
i n t h e v a l u e o f assets a s w o u l d e n t i t l e t h e m t o
a n examination f o r admission
words, ‘ t r . C h a i r m a n , a
t o t h e system.
state member banksman
I n other
b e admitted
to t h e s y s t e m i n proper c o n d i t i o n a n d m a y g o f r o m t h a t c o n -
dition into: -a--bad d i t i o n ,
ly i n d i c a t e d
continue
a n d there
o n the part
o f
P o a r d
t o make special examinations
The C h a i r m a n :
D
o I
of w h a t i s talking p l a c e
overnor Calkins:
understand
Governor S e a y :
o authority
o r anyone
t o
o f t h a t bank.
y o u wis 9
AdLscudcsion
i n other districts?
w o u l d L i k e t o know what t h e
other banks d o with regard t o examina
The Chairman:
n
S
v
a janks.
m
r
G o v e r n o r Seay?
w
Geverncr Harding:
e expostr f
wit}
, Chair-
M r . Curtiss makes regular examinaRhode I s l a n d a n d c h a r g e s
t h e m f o r it.
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Federal Reserve Bank of St. Louis
447
The examination fees for one o f the banks were $800, a n d
they p a i d i t v e r y c h e e r f u l l y a n d s a i d i t w a s t h e b e s t e x amination t h e y h a d e v e r h a d a n d w e r e g l a d t o h a v e i t .
te d o n e o n c e a
I t
year,
Governor Norris:
W e examine t h e m regulably, a n d m y
understanding i s that since t h e recent ruling o f t h e Board
we c h a r g e t h e s t a t e m e m b e r b a n k w i t h t h e c o s t o f s o m u c h o f
the e x a m i n a t i o n
a s represents a n y t h i n g b c y o n d t h e securing
of credit information.
Governor Seay:
D o e s t h a t cover t h e matter fully?
“hat d o t h e y d o i f a f t e r e x a m i n a t i o n
y m find that they
have n o t maintained their standard?
Governor Norris: G o v e r n o r Calkins d i d n o t a s k that
MAsstion,
Governor Calkins:
w
i a s k i t now.Ir,after a n exam-
ination o f t h e s t a t e b a n k s y o u f i n d t h e c o n d i t i o n u n s a t i s factory, w h a t i s v o u r c o u r s e o f trea
Governor Y o u n g :
v
e ecamine where
w e want
t o and when
we w a n t t o , a n d w e c h a r g e t h e b a n k s t h a t o w e u s money.
Those t h a t a r e
i n good condition
thing, a f t e r w e e x a m i n e t h e m I
a n d d o not
o e
u s anv-
think w e c o m e t o t h e con-
clusion that i t i s a gredit investigation a n d make n o charge.
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Federal Reserve Bank of St. Louis
448
Governor Biggs:
‘ v e have a very satisfactory arrange-
ment w i t h a l l t h e b a n k i n g c o missioners.
e amination o f e v e r y s t a t e institution,
w
e make a
joint
a n d i n that w a y
the charge that w e make i s only for t h e time f o r t h e men.
The examination i s made jointly w i t h t h e State banking
commissioners, u n d e r agreement, a n d i t has turned o u t very
satistactoriiy w i t h us.
Governor Pancher:
w e cooperate closely w i t h t h e
state banking departments i n t h e several states i n our
C r rs cl o r
m a k e c e g u l a r examinations.
where w e h a v e t o m a k e e x a m i n a t i o n s
I
n special c a s e s
t e g e t credit inforna-
tion w e d o i t a t the expense o f the banks,
Governor Biggs:
Governor Fancher:
M
t the expense o f your o w n bank?
Yes.
W e have h a d several cases
where t h e b a n k s h a v e n o t m a i n t a i n e d t h e i r p r o p e r s t a n d a r d
and i n s o m e c a s e s w e h a v e m a d e frequent e r a m i n a t i o n s
the e x p e n s e o f t h e banks.
T h i s procedure
at
s o far has
required o n e member b a n k t o withdraw f r o m membership,
Governor McKinney:
w e participate w i t h t h e state
banking authorities i n a t least o n e examination a year o f
every state b a n k member, a n d i f i t i s i n a n unsatisfactory
condition,
i f a n y bank i s found that way, w e sometimes m a k e
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Federal Reserve Bank of St. Louis
an independent e x a m i n a t i o n
Governor Cal'cinss
I
o f that bank,
s that a
credit e x a m i n a t i o n
or
a regular e x a m i n a t i o n ?
Governor McKinney:
U s u a l l y i t is a
tion a n d w e charge t h e member bank, ©
a satisfactory condition,
regular e x a m i n a -
I f they d o not develop
w e sometimes examine t h e m again
and give t h e m practically t h e same treatment that w e d o a
national b a n k w h o s e a f f a i r s a r e i n u n s a t i s f a c t o r y condition.
Governor ifcDougal:
T h e state banking departments,
generally speaking, cooperate w i t h u s a n d a s a rule w e
accept their reports.
T h e r e a r e many instances, however,
in.which w e h a v e f e l t t h e n e c e s s i t y a n d h a v e proceeded,
to make o u r o w n cxaminations. I
tion o f e x p e n s e
d o not think t h e w e s -
i s y o u c h e d u p o n i n t h e t o p i c a t all,
Governor Seay:
a y I
ask what y o u d o i f they d o not
keep themselves u p t o standard?
Governor iicDougal:
W
e undertake
t o assist t h e m b y
making s u c h r e c o m e n d a t i o n s a s w e c a n p r o p e r l y make,
and
have b e e n very successful i n carrying o u t that policy.
Governor M c K i n n e y :
you d o w i t h a
you not?
Y o u d o just about t h e same a s
national b a n k i n similar c i r c u m a t a n c e s ,
d o
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Federal Reserve Bank of St. Louis
450
Governor S e a y :
I
n o t h e r words,
y o u d o t h e best y e u
Governor M c D o u g a l :C e r t a i n l y .
Governor B a i l e y :
w
e have a
plan
o f cooperating
the state banks i n state banic examinations.
with
W e join with
them i n the e x a m i n a t i o n a n d i n lots o f instances a s s i s t
them---
i n the examination o f one o f the biggest banks
in Sansas City, a
trust company,
w e joined with them a n d
furnished some clerks t o kind o f supervise it, b u t the state
did. the Bis o n d o r it.
W e have b e e n getting along fine
with o u r s t a t e d e p a r t m e n t s .
being s u p e r i o r
T h e y take o u r advice
a s
t o o u r own, a n d w e c a n g e t t h e m t o act.
Governor “‘jellborn:
w
e make joint examinations w i t h
the s t a t e b a n k i n g d e p a r t m e n t s
the s t a t e s u p e r i n t e n d e n t
i n o u r district.
wishes
t o examine a
Whenever
bank which
is
a member o f our system, w e send o u r examiner w i t h hin,
Wwe m a k e t h e e x a m i n a t i o n
o n the basis
of a
credit e x a m i n a -
tion a n d make n o charge f o r it.
The Chairman:
same,
O u r practice i n New York i s much the
O u r examinations a r e made jointly with t h e state
departments.
I
n s o m e c a s e s w e h a v e g o n e i n aione t o m a k e
examinations.
T h e practice
i n N e w York, w h e r e a
stato
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Federal Reserve Bank of St. Louis
451
bank shows a n impaired condition a t all, i s just t o deal
with each case o n its merits a n d w e always cooperate w i t h
the s t a h e b a n k i n g s u p e r i n t e n d e n t s ,
Governor Calkins,
h a s y o u r o e s t i o n b e e n answered?
Governor Calkins:
S u f f i c i e n t l y , ‘Ar. Chairman, y e s .
The Chairnans ‘ W r . Harrison calls m y attention t o
the fact that s o m
i
n t h e Federal Reserve B a n k o f N e w
York h a s p r e p a r e d a
little s t a t e m e n t
o f procedure
i n connec~
tion w i t h t h e e x e c u t i o n o f orders f o r t h e T r e a s u r y D e p a r t ment,
b u t o n reading I
who p r e p a r e d
have f o u n d t h a t a p p a r e n t l y t h e m a n
i t d i d n o t think i t was well t o g o into t h i s
more p e r s o n a l c u e s t i o n t h a t I
have referredto,
really does n o t cover t h e whole story.
s o that i t
I t c a n b e dis-
tributed f o r w h a t v a l u e i t h a s f o r t h e i n f o r m a t i o n
Governors
o f the
a s t o h o w w e actually c o n d u c t t h e business
i n
New Y o r k .
The next i s Topic 6-(d).
6-(d) C o r m i t t e e o f Trust Company Division
A.B.A. o n “Relations w i t h t h e Federal
Reserve FSystem", f o r the purpose o f
crystalizing t h e p r e s e n t m e m b e r s h i p
of t r u s t c o m p a n i e s a n d i n d u c i n g
wherever possible eligible nonmember
trust companies t o .join the system.
That w a s sugyested b y New York because o f correspond-
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Federal Reserve Bank of St. Louis
452
ence t h a t I
have h a d a n d t h a t y o u B a v e d o u b t l e s s h a d w i t h
the Tmst Company Section o f the American Bankers Association with regard t o emlarging t h e membership o f trust companies
i n the Federal Reserve System, I
teld M r . L u c a s
that i f h e desired I would bring t h e tuwestion u p before
this meeting a n d s e e whether there w a s anything t h a t could
be d o n e
b y the system
t o promote
what
h e was endcavoring
to bring about, a s i t was o u r wish t o take a n y action w h i
would e n c o u r a g e t h e a s s o c i a t i o n
t o bring trust companies
into t h e System,
Governor Fancher: I
received t h e l e t t e r w h i c h I
tember.
W
suppose e a c h e f the Gevernors
received f r o m iticLucas i n Sep-
e furnished h i m w i t h a
list o f t r u s t c o m p a n i e s
in our district that were eligible f o r membership, g i v i n g
him what h e wanted a s t o capital, surplus, a n d s o forth.
I d o n o t k n o w h o w effective t h e i r effort w i l l b e t o bring
the t r u s t c o m p a n i e s i n t o membership.
The Chairman: I
by passing a
a m willing t o dispose o f the topic
resolution authorizing y o u r chairmen t o ad-
vise Mr. “cLucas,
o r authorizing ir. Harrison t o d o so,
that t h i s s u b j e c t w a s b r o u g h t
u p a t t h e meeting a n d that i t
was t h e sense o f the meeting that e a c h Federal reserve
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Federal Reserve Bank of St. Louis
453
bank w o u l d c o o p e r a t e
t o t h e extent o f i t s pewer
proper w a y t o p r o m o t e t h i s m a t t e r
i n any
i n the respective d i s -
tricts, and to please call upon us if they need any such
cooperation,
a n d t o express o u r appreciation o f t h e action
of t h e T r u s t C o m p a n y S e c t i o n o f t h e A m e r i c a n B a n k e r s A s s o elation.
Governor Fancher: I
will s e c o n d t h a t motion.
(The motion, h a v i n g b e e n d u l y seconded,
The Chairman:
w a s carried.)
T h a t disposes o f the regular program
and w e w i l l n o w t a k e u p t h e s u p o l e e n t a l program.
No. 1
T o p i c
o n this p r o g r a m w
a
s received t o o late b y the Secpe-
yary t o g o o n the regular pregram, a n d the same i s true o f
all other topics.
W
e will take u p No. 1 .
1. ‘ m a t amendements t o the National B a n i Act
are n e c e s s a r y i n o r d e r t h a t n a t i o n a l b a n k s
may b e b e t t e r a b l e t o m e e t b a n k i n g r c a u i r e -
ments a n d that t h e development o f the national b a n k i n g s y s t e m m a y m o r e c l o s e l y f o l l o w
the trend o f banking development i n the
country a t l a r g e s o f a r a s e x p e r i e n c e s h o w s
that this development i s along sound a n d
strong l i n e s ?
I want i call the attention of the meeting to the fact
that t h e proposed amendment t o the national b a n k act which
was introduced b y Congressman McFadden, a f t e r collaboration w i t h t h e C o m p t r o l l e r
o f t h e Currency,
w a s t h e product
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Federal Reserve Bank of St. Louis
454
of many months o f work; t h e r e h a s been a tremendous amount
of discussion about i t here i n the Treasury Building, a n d
I do not see h o w i t i s possible,
us t o make a recor:endation.
cerned, I
o n such short notice, f o r
S o far a s N e w York i s con-
d o n o t feel t h a t w e have h a d sufficient t i m e t o
formulate anything. I
do not know how the rest feel
about it.
Governor Harding: I
will offer a. resolution that
we pass t h e topic o n the ground that some o f us have n o t
had o p p o r t u n i t y t o d i s c u s s i t , a n d t h a t w e d o n o t f e e l
justified i n making a n y recow -endations until w e d o have
such opportunity.
Governor Fancher:
Seconca.
(The motion, being duly seconded, was carricd.)
The Chairman:
T h e - n e x t “flopie Ie...
2. “ h a t steps whould b e taken t o bring
about the gradual retirement o f the
jational
a
b a n k c u r r enn c y a n d t h e f i n a l
retirenent o f the legal tenders?"
That m a t t e r w a s o n t h e p r o g r a m o f t h e Agents! C o n f e r -
ence a n d they made a report, a n d t h e substance o f i t was
that it should be brought about gradually, very much i n
line w i t h t h e s u b s t a n c e
of a
report w h i c h h a s b e e n m a d e t o
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Federal Reserve Bank of St. Louis
455
the T r e a s u r y
by a
little c o m m i t t s e w h i c h h a s b e e n s t u d y -
ing t h i s m a t t e r s e p a r a t e l y . I
that w e i n general endorse
weuld b e w i l l i n g t o v o t e
cae
. . recom-endation
@ 8 t h e Conf«r-
ence o f Federal R e s e r v e Agents.
Governor Fancher:
One i s t h e r e t i r e m e n t
T h e r e a r e t w o aquostions involved.
o f national b a n k currency,
second t h e f i n a l r e t i r e m e n t
The C h a i r m a n :
Y e s ,
a n d the
o f l e g a l tender.
and I
think t h e y a r e b o t h covered
in the Agents! Report.
Governor Seay: I
te draft a
move t h a t t h e S e c r e t a r y
resolution, s i m i l a r
i n purport,
b e requested
t o that submit-
ted b y t h e F e d e r a l t e s e r v e Agents.
Governor Young: I
will second that.
(The motion, being duly seconded, w a s carried.)
The Chairman:
N o , 6:28
3. Reports o f Examinations o f National
Bawks .
The recommendation i s that t h e office o f the Comptroller o f t h e C u r r e n c y r e v i s e r e p o r t s
tional b a n k s
s o that these reports
o f examinations
will contain a
o f Na-~
separate
schedule s h o w i n g n o t e s r e d i s c o u n t e d w i t h t h e F e d e r a l r e -
serve banks a n d pledged a s collateral, classifying s a m e
slow, doubtful, undesirable a n d loss, w i t h such other in-
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Federal Reserve Bank of St. Louis
456
formation a s w o u l d b o o f v a l u e t o t h e P e d e r a l R e s e r v e
banks,
I sec t h a t Governor “ellborn
i s absent a n d w e h a d per-
haps b e t t e r p a s s t h a t f o r t h e t i m e b e i n g .
No. 4
is
4. C o r . e s p o n d e n c e b e t w e e n H x a m i n e r s a n d
Comptroller's O f f i c e .
It i s recom:ended t h a t t h e examiners furnish the Federal reserve banks w i t h copies o f letters t o the Comptroller's O f f i c e
b y directors
o f banks u n d e r c r i t i c i s m a n d t h e
replies t o such letters b y the Comptroller's Office.
That also was proposed b y Atlanta, a n d w e will pass
to No. 5
i n Governor vellborn!s absence f r o m t h e room.
No. ©
is whether o r not a Federal Reserve B a n k m a y
properly receive maturing collection items w i t h instruc-
tions t o deposit the proceed& o f the collection i n some
commercial b a n k f o r t h e a c c o u n t o f a
That i s p r o p o s e d
member b a n k ,
b y S a n francisco.
Governor C a l k i n s :
Personally, I
do not s e e a n y reason
why w e should n o t carry o u t that transaction a n d
that’ i t b e passed,
Governor Seay:
diate action,
I f i t i s not necessary t o have imne-
w e have h a d some correspondence onthis subject
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Federal Reserve Bank of St. Louis
457
with t h e S a n F r a n c i s c o b a n k , a n d w e a r e o f t h e o p i n i o n
that
i t might well
b e ref: r r e d
t o t h e Standing Committee
on C o l l e c t i o n s ,
Governor C a l k i n s : I
The Chairman:
I
will m o v e t o t h a t effect.
t i s m o v e d t h a t t h i s t o p i c b e refer-
red for eramination a n d report w i t h recommendation,
to
the Standing Committee o n Collections.
Govermor McKinney: I
will second that.
(The motion, having been duly secondec, w a s carried.)
The Chairman:
f h e next topic i s
6. C o m - u n i c a t i o n f r o m t h e A u s t r i a n A s s o c i a tion o f B a n k s a n d Bankers r e l a t i v e t o
counterfeiting currency.
The Chairman:
T h e r e i s a n association
o f banks a n d
bankers i n Austria, w h i c h I believewas t h e greatest headquarters
i n the world for a
g a n g o f counterfeiters.
a t one
time, w h o p l i e d t h a t t r a d e f o r t h e p u r p o s e o f counterfeiting t h e c u r r e n c y o f kurope--- E u r o p e a n c o u n t r i e s h a v e b e e n
flooded w i t h counterfeit currency,
includes a
good m a n y a t t e m p t s
currency--~ t h a t A s s o c i a t i o n
a s you know--- a n d i t
t o counterfeit A m e r i c a n
is a
protective a s s o c i a t i o n
for t h e p u r p o s e o f k e e p i n g c l o s e l y i n f o r m e d a b o u t n e w i s -
sues o f counterfeits t h a t a r e being made, a n d t o r u n down
the criminals.
T h e y have secured cooperation
o f the
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Federal Reserve Bank of St. Louis
458
United States Treasury, t h e Bureau o f Seci:ét Service i n
the Tpeasury,
a n d n o w they w i s h u s t o send t h e m certain
limited information which we would do, i f wea agreed to do
anything, u n d e r t h e supervision o f the Treasury.
desire t o p r i n t o u r n a m e s
o n the publication w h i c h i s
sent o u t r e g u l a r l y t o t h e b a n k s
Treasurers
T h e y
o f issue through t h e
o f t h e various nations t h a t a r e taking p a r t i n
this a n d t o p u t a s o n t h e m a i l i n g l i s t f o r t h e publication.
There a r e c e r t a i n r e p o r t s t h a t w i l l b e e x p e c t e d o f us,
which I understand will b e made b y the Treasury Department.
We have h a d this organization investigated through t h e
Department o f State a n d they report b a c k that i t i s a n
eminently respectable a n d desirable thing, w i t h which o u r
Government i s cooperating.
N o w , i f youdesire
t o author-
ize u s t o make a n a r r a r g e m e n t t
o join s o that w e may g e t
the literature, a
the S e c r e t a r y
resulution s h o u l d b e p a s s e d a u t h o r i z i n g
t o take t h e necessary steps.
Governor Norris:
The Chairmans
A r e there a n y dues, Mr. Chairman?
T h e r e a r e n o dues.
I t involves n o
financial r e s p o n s i b i l i t y .
Governor Norris: I
Governor Young:
s o move, ifr. Chairman,
Seconded.
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Federal Reserve Bank of St. Louis
459
(The motion, h a v i n g beenduly seconded, w a s carried.)
T h e next i s
The Chairman’
7. W e m b e r b a n k ¢ € pense,
Discussion o f circulars issued b y
the P e d e r a l R o s e r v e B a n k s o f B o s t o n
and N e w Y o r k r e l a t i v e t o t h e c o m parison o f t h e operations o f representative m e m b e r b a n k s ,
The C h a i r m a n s
I
t seems t h a t t h e Federal r e s e r v e
circular
bank o f B o s t o n g o t o u t a
member, banks concerning a
Governor Harding:
o r communication
t o the
study o f sources o f revenue--~
P a r d o n me, t h a t w a s g o t t e n o u t b y
the Federal Reserve Agent o n his o w n responsibility.
is not a tank publication.
I t
I t is a Federal Reserve “gent
proposition.
The Chairman:
I
t a t t r a c t e d s o m e attention.
I t was
also d o n e b y t h e F e d e r a l R e s e r v e B a n k o f N e w York. I
not s e e n t h e m compared,
but I
t h i n k t h e y a r e m u c h alike.
At any rate, t h e one which w e issued received a
of v e r y f a v o r a b l e c o r m e n t a n d I
aests
f o r it.
have
have h a d a
good deal
great m a n y r e -
T h e sug»estion w a s made that possibly
other r e s e r v e b a n k s t i g h t w a n t t o d o it.
Governor Harding:
w i r . Curtiss! c i r c u l a r r e c e i v e d
a g o o d d e a l o f comment. I
a bank p r o p o s i t i o n
merely s t a t e d t h a t i t w a s n o t
i n order t h a t h e might receive d u e
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Federal Reserve Bank of St. Louis
ecredis f o r it.
The Chairman:
T h i s topic really should not b e o n
our program, b u t should b e o n the Agents! program.
suggestion i s t h a t t h e S e c r e t a r y b e a u t h o r i z e d
M y
t o refer
this t o Mr. J a y t o t a k e u p w i t h t h e federal R e s e r v e A g e n t s
and i f there i s n o objection, t h a t action will b e taken.
The: next topic i s
8. “Whether o r not i t might b e advisable
to suggest t o the Federal Reserve B a r k o f
Atlanta t h e o u e s t i o n o f e m p l o y i n g a counsel
representative o f a l l F e d e r a l R e s e r v e
Banks t o t a k e p a r t i n t h e p e n d i n g c a s e o f
Pousson v . F e d e r a l R e s e r v e B a n k o f Atlanta.
Governor Harding: I
have read the bill o f complaint
in this I o t a case, a n d I have talked w i t h our counsel a n d
he telieves,
ple involved,
as I
do, t h a t t h e r e i s n o general l e g a l p r i n c i -
o f interest
t o t h e system.
T h e whole thing
hinges wpon.a aiestion o f fact.
The a l l e g a t i o n i s made t h a t t h i s tMmnk i n I o t a b e i n g
in practically a n insolvent condition, t h a t t h e said N e w
Orleans Branch o f the Federal Reserve Bank o f Atlanta, o n
learning o f said insolvency i n the spring o f 1925, practically t o o k c h a r g e o f t h e s a i d b a n k o f Iota, p l a c i n g a
large s u m o f money i n said bank,dictating t o the Board o f
direcotors
o f the said Iota Bank
i n «hat manner
t h e affairs
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Federal Reserve Bank of St. Louis
461
of t h e bank should b e conducted, n a m i n g ir. Joseph A.
Sabatier
t o l o o k after i t s interests
i n handling a n d
passing o n all loans i n said bank o f Iota, a n d that t h e
Board o f Directors
o f t h e s a i d B a n k o f I o t a thereupon,
by reason o f the insistence o f the Federal Reserve Bank,
appointed Mr. Joseph A. Sabatier,
o n March 19, 1923, mana-
ger o f t h e s a i d B a n k o f Iota, g i v i n g h i m f u l l c o n t r o l o v e r
the t a n k ' s a f f a i r s , w i t h f u l l p o w e r
t o pass u p o n a l l loans
or advances m a d e b y the bank, a n d full power t o administer
all o f the sffaips o f the bank", a n d so: fomen,
The point i s then made "that i n accordance therewith
the s a i d F e d e r a l R e s e r v e B a n k a d v a n c e d
t o t h e Bank o f Iota
a large s u m o f money f o r t h e p u r p o s e o f c a r y i n g f o r a n d
taking o f f t h e c r o p o f 1923, a n d p l a c i n g
ently s o l v e n t condition,
remaining
i t i n a n appar-
t h e said Joseph A . Sabatier
i n practical c h a r g e a n d c o n t r o l
o f the said
bank under t h e s a i d resolution o f the board, a n d a s the
direct r e p r e s e n t a t i v e a n d - a g e n t
o f t h e Federal Reserve
Bank.
"Jpon t h e c o m p l e t i o n
stated,
o f this t r a n s a c t i o n ,
a s above
t h e s a i d Fed: ral R e s e r v e B a n k p r a c t i c a l l y c o n t r o l -
led, o p e a t e d a n d b e c a m e r e s p o n s i b l e
t o a l l o f t h e creditors
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Federal Reserve Bank of St. Louis
A62
and e s p e c i a l l y t h e d e p o s i t o r s
o f t h e B a n k o f I o t a b y rea-
son O f t h e f a c t t h a t i t h e l d i t e e l f - o u t - t o t h e w o r l d a s
the governing authority m d owner o f said bank, putting
in its money a d getting possession o f practically a l l o f
the assets o f said bank b y reason o f said advances;
The w h o l e t h i n g hin. e s o n a
estion
o f fact,
m d
our counsel advises u s that i t would b e very improper
action o n o u r p a r t t o p a r t i c i p a t e
Governor Pencher:
i n t h e case,
O u r attorneys advise u s that i t
is not a matter that o u r bank should participate in, that
it i s a local matter a n d n o t 2 system matter, a n d I have
so a d v i s e d t h e Board,
Governor Norris: I
was going t o s a y I presumed every
bank had received a letter from the Board making the inquiry,
and I
suppose m o s t o f u s h a v e r e p l i e d t o it, a n d I d o n o t
suppose
i t i s necessary
f o r m e t o g o over t h e grounds
stated i n our reply,
Governor :ifeKinney:
say t h a t w e h a v e a
of t h e d e p o s i t o r s
i e . Chairman, I
would like t o
somewhat s i m i l a r s u i t o n hand.
S o m e
o f t h e F i r s t N a t i o n a l B a n k o f Magdalena,
co, which suspended business a
year ag@, h a v e
suit a g - i n s t u s i n t h e F e d e r a l C o u r t o f N e w M e x i c o
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Federal Reserve Bank of St. Louis
463
for t h e specific s u m o f 250,000.
respects a r e s i m i l a r
t o those
T h e allegations i n some
i n t h e other case.
T h e y
charge t h a t w e put o u r m a n i n t o take charge o f the bank,
that h e took out t h e best collateral a n d then went o f f
and l e f t t h e bank. i
n e v e r o€Curred) t o W s 1 h W a d a n e
thing but just what Governor Harding h a s stated, a
of fact, a
question o f h e t h e r w e d i d t h e t h i n g s t h a t t h e y
charge a g a i n s t u s .
O
Governor Harding:
f c o u r s e w e k n o w t h a t w e d i d not.
G o v e r n o r ‘“icllborn tells m e that
he c a n d i s p r o v e t h e s e allegations,
end- tt.
question
a n d i f h e c a n i t will
I t i s not a system matter.
Governor ‘ S e a y : I
move i t i s t h e c o n s e n s u s
o f opin-
ion that i t i s n o t a system mattor a n d that counsel representing a l l o f the other reserve m n k s should n o t b e employed t o t a k e p a r t i n t h e p e n d i n g c a s e ,
Governor iicDougals I
The Chairman: I
will second the motion.
would l i k e t o s a y t h a t I
a m ready
to vote f o r t h e motion, t h e discussion having convinced
me that t h e situation does n o t justify o u r recuesting t h e
Federal R e s e r v e B o a r d t o e n g a g e c o u n s e l f o r t h e s y s t e m t o
appear
i n this proceeding.
(The motion, having been-duly seconded, w a s carried.)
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Federal Reserve Bank of St. Louis
The C h a i r m a n :
H.R.
T h e . testo
C O P
or 10.
pees
7 6 8 =
C o n g r e s s m a n Thomas, O k l a h o m a ,
This b i l l w o u l d r e m o v e t h e S e c r e t a r y o f
the Treasury a n d Comptroller o f the Currency f r o m memtership o n the Federal R e serve Board a s ex-officio members, provide
for
a n additional
represent l a b o r ,
all
Board
appointive tember
t o
a n d increase t h e salary o f
meubers
t o
H a y
OOO p e r
G C s
amun,
(Discussion o f this topic folloved.)
Governor H a r d i n g : T
Conference
o f Governors
offer
prefers
t h e resolution
not
t o express
that the
a n y opinion
onthis subject for two reasons: First, that the members
of t m c o n f e r e n c e h a v e h a d n o t i m e f o r c o n s i d e r a t i o n
of
of the bill; s e c o n d , because t h e bill
the subject matt r
does n o t appear directly t o affect t h e operations o f the
Federal reserve banks, b u t relates t o the versonnel a n d
compensation
o f the Federal Reserve Board,
opinion o f t h e c o n f e r e n c e t h i s i s a
tion b y t h e members
a n d i n the
matter f o r c o n s i d e r a -
o f t h e ®ederal Reserve
rather t h a n f o r the operating heads o f the
Banks.
Governor N o r r i s :
Seconded.
Governor Seay:
(The m o t i o n ,
h a v i n g bes« j u l y seconded,
w a s carried.)
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Federal Reserve Bank of St. Louis
The Chairman:
T h e r e a r e certain subjects
spplemental p r o g r a m w h i c h w e r e s u g e s t e d
Governor ‘iellborn n o t b e i n g here,
matters
them,
o f great importance, I
o n the
b y Atlanta.
a n d neither
o f them being
might s u » z e s t t h a t w e p a s s
I n his absences, i f there is: n o objection,
Governor Young:
I will make a
h a . to" B s ]
a , i p CHalrmany
w t i o n t h a t those banks desiring t h e informa-
tion t a k e i t u p w i t h t h e C o m p t r o l l e r
o f t h e Guirrency.
Governor Biggs: S e c o n d e d ,
(The motion, b e i n g dulysecondec, w a s carried.)
Governor # c e D o u g a l :
that i t w o u l d
expect,
‘ i t h re,.ard
b e inadvisable
t o be ¥
t o N
4 , i
will m o v e
t o ask, a n d u n r e a s o n a b l e
to
u r n i s h e d W i t h t h e inroruation. c a l l e d f o r
ine tive: LOpi Gg.
Governor Young:
Seconded,
(The motion, b e i n g duly seconded, w a s carried.)
The C h a i r m a n :
T h a t completes
to a d v i s e
t h e mesting t h a t I
approval,
t o hold a
o u r program. I
have agreed,
subject
want
t o your
short conference w i t h t h e Federal R e -
servé Board a t nine o'clock tomorrow morning, a n d I sug~
gest that w e n o w r u n over o u r program with t h e idea o f
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Federal Reserve Bank of St. Louis
466
selecting t h e definite matters t h a t w e wish t o take u p
with t h e Board,
(whereupon,
o n motion,
d u l y seconded,
t h e conference
adjourned u n t i l tomorrow, F r i d a y , N o v e m b e r 1 4 , 1 9 2 4 ,
at
1710 o'clock p. m., t h e morning session being devoted t o
a joint conference w i t h t h e Federal Reserve Board.)
PIPE
At.
Friday, November 1 4 , 1924.
tte 6
Clogs io...
The conference o f Governors reconvened, pursuant t o
adjournment o f yesterday,
a t 1:10 o'clock p . m.
Appearances a g previously noted.
The Chairman:
T h e conference will come t o order.
If we proceed quickly, I
think our business c a n be trans-
acted i n t i m e t o a c c o m m o d a t e e v e r y o n e .
My understanding i s that a member o f the Board suggests that,
i n order that everything b e covered b y action
of t h e c o n f e r e n c e ,
w e consider
m w t h e subject
o f discount
bates.
The b e l i e f
o f t h e Governors h a s b e e n uniforrly f o r
some y e a r s p a s t t h a t t h e o p e r a t i o n s o f t h e O p e n a r k e t Com-~
467
on matters p r e l i m i n a r y
t o t h e possible n e e d f o r changes
T h e discussion
in discount r a t e s .
t o exert s o m e influence
i f y o u please,
mittee a r e designed,
o f the O p e n Market
Committee w i t h t h e Federal Reserve Boerd, o f which n o
stenographic r e c o r d w a s k e p t , i n c l u d e d a
discussion
of
the possibility o f a change i n discount rates i n the various
Federal reserve banks, a n d inasmuch a s this question i s
suggested f o r further discussion a t the Joint Conference
with t h e action o n the report o f the Open Market Committee,
I take t h e liberty o f suggesting thet o u r further discussion
of the rates b e i n executive s
ession, a n y action taken, how-
ever, t o b e reported t o the Federal n e s erve Board w i t h a preliminary s tatement.
(Whereupon, t h e conference w e n t into executive ses-~
sion, t h e reporter leaving t h e room.
the e x e c u t i v e s
ession,
A t the conclusion o f
t h e reporter returned
t o the con-
ference r o o m a n d the following proceedings w e r e had:)
The Chairman:
A f t e r discussion b y all o f those pre-
sent o f the subject o f discount rates, i t appears, first,
thet t h e d i s c o u n t r a t e s
in e v e r y m e e t i n g
o f t h e reserve banks w e r e reviewed
o f t h e directors,
a n d i t developed t
the directors o f the reserve banks recognize t h e t a
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Federal Reserve Bank of St. Louis
at
change
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Federal Reserve Bank of St. Louis
has t a k e n p l a c e w h i c h w i l l m a k e i t n e c e s s a r y
t o give spe-
cial consideration t o the subject o f discount rates a t
this time.
I t also appears t h a t steps a r e n o w being t a k e n
to effect progressive increases i n the rates a t which t h e
System i s t o purchase bills i n the open market, a n d i n
view o f t h e a c t i o n w h i c h h a s b e e n t a k e n w i t h r e s p e c t
the o p e r a t i o n s
securities,
o f t h e O p e n :iarket C o r m i t t e e
w h i c h action,
to
i n goverment
a s consistently understood
in
recent years, w a s preliminary t o final consideration o f
changes
i n d i s c o u n t rates,
i t was t h e o p i n i o n o f those
present a t the meeting that n o imnuediate action towards
an incwease i n discount rates w a s a t the present t i m e
needed,
although
i t would
b e considered
a t every meeting
of the directors o f the bank with a view t o changing,
if a change w a s indicated bychanging conditions.
It w a x n o t f e l t
b y t h e conference
tion o f t h a t s o r t s h o u l d
that
m y recomnenda-~
b e made t o t h e F e d e r a l R e s e r v e
Board, a n d that t h e i r position i n this regard was i n exact c o n f o r m i t y w i t h t h e r e m a r k s
a t the Joint Conference
of
Br. Stuart a n d br. iilller,who discussed the matter o n behalf o f t h e F e d e r a l R e s e r f e B o a r d .
The a t t e n t i o n o f t h e F e d e r a l R e s e r v e B o a r d i s c a l l e d
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Federal Reserve Bank of St. Louis
469
to t h e f a c t t h a t o n e
be c o n s i d e r e d
o f the preliminary
b y the Onén market
with a n y p r o p o s a l
steps that
C o m1lttee
mst
i n connection
t o increase t h e rediscount r a t e w o u l d b e
the possible sale, beyond thatnow authorized,
o f some part
of t h e i n v e s t m e n t s
handied
i n government s e c u r i t i e s .
the Open ilarket Committee,
I
b y
n view o f this fact a meet-
ing o f t h e C o m m i t t e e h a s a l r e a d y b e e n a r r a n g e d
t o b e held
in N e w Y o r k i m n e d i a t e l y a f t e r t h e 1 5 t h d a y o f December,
quarter d a y , a n d i f a n carlier m e e t i n g o f t h e c o m a i t t e e
desired o r r e q u i r e d
b y developments,
t h e Chairman h a s been
instructed t o arrange t o have s u c h a meeting
it m a y b e d e s i r a b l e
is
a t which time
t o consider whether t h e authority n o w
held b y t h e c o m m i t t e e
i s adenuate.
It was further t h e sense o f the meeting, without
dissent,
G o v e r n o r Caikins a n d Governor “,ellborn only
being absent, t h a t there would b e n o Gissent o n the part
ing
of any rese
a n k t o adopt/a policy o f liquidating the
accounts t h e m i n u t e o c c a s i o n
t o d o s o w a s indicated.
At the conclusion o f the-meeting attention w a s drawn
to t h e f a c t
newspaper,
cussion
t h a t an a r t i c l e h a d a p p e a r e d
i n a
i n a tvashington
recent i s s u e r e l a t i n g t o t h e p o s s i b l e d i s -
o f discount rates
a n d other matters
a t this meeting,
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Federal Reserve Bank of St. Louis
470
and i n V i e w o f t h a t f a c t a l l o f those. p r e s e n t
meeting entered i n t o a
of this meeting 8)
a n d
a t the
pledge that t h e fact o f the holding
the subject discussed a n d t h e conclu-~
sions r e a c h e d h a d n o t b e e n a n d w o u l d n o t b e d i s c u s s e d w i t h
anyone e x c e p t t h e p r o p e r o f f i c e r s
o r directors
o f t h e rospec-
tive reserve banks, a n d except t h e report t o b e made b y
the Chairman t o the Federal Reserve Board.
Governor Fancher:
I want
“ a p , Chalrman, b e f o r e
t o move that Governor Strong continue
w e adjourn,
a s Chairman
of t h i s conference,
Governor MeKinney:
T
t second t n a t motion.
(The motion, being duly seconded, w a s unanirously
carried.)
The Chairman:
T h e r e b e i n g n o further business
before t h e conference, I
will e n t e r t a i n a
motion t o
adjourn.
(Whereupon, upon motion duly seconded, t h e conference
adjourned sine die, a t 1:45 o'clock p. m.)
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